01_ In the 1970s, during one of the many attempts to "contain" inflation in Brazil, Médici and Delfim froze public service prices in Rio de Janeiro. At that time, inflation was measured only in Rio and was considered valid for the entire country. The water and sewage services of the then Companhia de Águas and Companhia de Esgotos da Guanabara (Cedag and Esag, respectively) — both with large debts to the World Bank (WB) and Inter-American Development Bank (IDB), resulting from financing for the Guandu system and the oceanic sewage interceptors — responded to the situation by creating a "basic tariff." The rate was frozen as Brasília wanted, but "increasing steps" were added to financially rebalance revenue, creating a sort of internal cross-subsidy.
02_ At the time, it was argued that this would be a form of income redistribution, as those consuming more water were thought to be wealthier. This has turned out to be a misconception that persists today, as poorer households generally have more residents. In practice, the tariff model greatly increased revenue and made it difficult to see the increases. Consequently, banks comfortably received their loans and supported this structure enthusiastically, spreading it worldwide.
03_ Initially, the "steps" were more modest. Today, they are not. The same cubic meter (m³) of water charged in Rio varies by more than seven times, depending on the recipient. Industrial and commercial establishments pay more than residences. The volume and price of sewage services m³ match those of water. For example, in August 2023 (Águas do Rio, South Zone), a consumption of 30 m³/month (4 people/house at 250 liters per person per day) resulted in a bill of approximately R$ 540. For 6 people (45 m³/month), the bill would be R$ 1,040. A 50% increase in consumption (from 4 to 6 people) represents almost a 100% increase in the bill. The same pattern is observed at Sabesp, Copasa-MG, and almost everywhere else.
04_ These tariffs are difficult to understand, manage, and audit. Worse, the price signals are so misleading that they lead to seeking alternatives that, in a balanced tariff environment, would not make sense. For example, hiring water trucks and drilling wells are alternatives that threaten health — as water is not always potable — and do not make economic sense: water transported through pipes should cost less.
05_ If the goal were to achieve "social justice" through water and sewage (sanitation) charges, it would be better to charge for the availability of services to all properties, including vacant lots and empty houses. Provided, of course, that pipelines are available in front of the property. Perhaps due to the distance from the source, in Santana (São Paulo) and Campo Grande (Rio) it would be cheaper than in Jardins or Ipanema; after all, Santana is closer to Guaraú and Campo Grande to Guandu. Charging a fixed price per m³ measured by the meter, without "steps" (water + sewage), is an obvious path that will eventually happen to make the average m³ cheaper.
06_ Social needs should not and cannot be ignored. There is a so-called "social tariff," with a value of about R$ 50/month, provided consumption is less than 15 m³/month, subsidized by normal tariffs. It would be better if the subsidy were granted in the form, for example, of a "water voucher."
07_ Finally, transitioning from the current structure to a more rational one needs to be studied and implemented cautiously and gradually, to avoid financial imbalances.
Miguel Fernández y Fernández
Former engineer at SABESP, president of AQUACON, regional director of the Institute of Engineering, member of ABES Brazilian Association of Sanitary Engineering (since 1970) and occupies chair 101 at the National Academy of Engineering.
Text with 3,520 characters, Ra, 2024apr10, Article published in the IE Journal Aug2024, pages 78 and 79s, Ra, 2024abr10, Artigo Publicado na Revista do IE ago2024, págs 78 e 79
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