first steps towards implementation took place, with no federal assistance. However, further implementation of the reform has proved challenging.

In the Alto-Tietê River Basin, the subject of this Working Paper, the advances and difficulties faced by the implementation of the São Paulo water reform are well illustrated, particularly because of the high levels of industrialization and urbanization of the basin. This case study is part of an international study of experiences in decentralizing integrated water management to the lowest appropriate level _._ The larger study, supported by the World Bank, seeks to evaluate the extent to which river basin management efforts have been successful and to identify the factors that can be associated with both positive and negative outcomes. An important consideration in this context is that “the lowest appropriate level” for integrated river basin management varies between countries, states and even river basins. For this reason, the methodology necessarily needs to take into account the hydrological, socio-economic, cultural and historical conditions in the case study areas. The present research project explores these factors both through a survey of river basin organizations throughout the world and case studies of eight river basins, namely the Murray Darling River basin in Australia, the Fraser basin in Canada, the Tárcoles basin in Costa Rica, the Brantas basin in Indonesia, the Warta basin of Poland, the Guadalquivir basin in Spain, and the Alto Tietê and Jaguaribe basins in Brazil.

In the next two sections, the analytical framework and methodology of the study are presented. The paper then briefly describes the Alto-Tietê basin, the new institutional arrangements there, and the role of stakeholders in these institutions. It then further examines these changes through the lens of the analytical framework presented by looking at how a series of factors affect the evolution of decentralization, such as initial conditions and context, the level of commitment to decentralization on the part of both central and local authorities, the capacities of central and local institutions, and the design of basin-level institutions. Finally, the paper assesses the performance of the decentralization process by examining three critical factors: devolution of authority, stakeholder participation and financial self-sustainability.

# **2. Analytical Framework**

This case study follows the analytical framework established by the research team and applied in all eight case studies. The literature on institutional analysis of natural resource management and decentralization identifies a series of political and institutional factors associated with the emergence and sustainability of stakeholder- based, decentralized arrangements (Ostrom 1990, 1992; Agrawal 2000; Alaerts 1999; Blomquist and Schlager 1999; Bromley 1999; Easter and Hearne 1993; and Wunsch 1991). The studies seek to evaluate how these factors operate in each of the empirical settings considered.

The framework explores a series of political and institutional variables.

i) Contextual factors and initial conditions. The literature on decentralized water resource management suggests that successful decentralization is at least partly associated with the social context at the time a decentralization initiative is attempted, including:

- Economic development of the nation;

- Economic development of the basin area;

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