return to the basin. This means that revenues from water charges would still be insufficient for ensuring the basin's financial self-sufficiency, covering only about 20% of annual investment needs<sup>44</sup> .

In conclusion, even though the water charges will not guarantee full financial selfsufficiency, they will constitute a strategic foundation for the decentralized management system in the Alto Tietê basin.

# **_9.4. Changes in Riverbasin Management Outcomes – Strengths and Weaknesses of the Institutional Arrangements in the Alto-Tietê River Basin Case_**

Although it is still too early to allow for a complete analysis of the physical impact of decentralization in the Alto Tietê basin, a series of changes can be noted.

**Decision-making regarding investments.** Given the small amount of funds available, the committee’s strategy has been to give priority to non-structural projects (rationalization of water use, demand management, capacity building, environmental education, etc.), leaving traditional state agencies (SABESP, DAEE, etc.) to carry out large scale infrastructure projects<sup>45</sup> .

**Water permits.** DAEE has intensively and progressively issued water permits in São Paulo State, since the beginning of the reform. Another important advance was the integration of the two management agencies. DAEE now consults CETESB when it is issuing water permits and CETESB takes DAEE’s water permits into account when authorizing effluent discharges.

A recent World Bank study (Baltar, Azevedo, Rêgo e Porto, 2003) emphasizes that knowledge about water resources in São Paulo state is strong, thanks to DAEE’s institutional capacity. To support the water permit system, DAEE has about 150 field officers and 40 others in the São Paulo headquarters, much more than any other state in Brazil<sup>46</sup> . However, the Bank study also pointed out that there is still a need for regular monitoring and control, which occurs only in the case of complaints by third parties.

**Water resources protection, urban land use, and environmental policy integration** . The Alto-Tietê committee and subcommittees will probably face difficulties in approving and implementing the specific laws and programs they are elaborating in conjunction with State Headwater Protection Law of 1997. However, the importance of this initiative goes beyond the fact that a major problem has been openly discussed and politicized.

> 44 Nevertheless, the needs estimate took into account some sanitation and drainage projects which have funding already guaranteed by executing agencies —DAEE, SABESP, municipal water and sanitation companies—, in some cases with the participation of international agencies.

> 45 The most important of these investments is the Tietê River Pollution Control Projects financed by the Inter-American Development Bank (IDB). Its overall objective is to improve the environmental quality of the Tietê basin in metropolitan São Paulo, conserving and making efficient use of water resources in the upper reaches of the basin, including a pilot program to reduce unaccounted water losses. The project was the first in a series of three projects financed by the IDB, launched in 1991. The second phase, which started in 2000, is yet to be concluded, but a new major phase is under negotiation, for the clean-up of the Billings reservoir.

> 46 Some of the DAEE officials (especially in the state interior) also provide technical support for urban drainage management in the municipalities.

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