The Costs of Flooding in São Paulo

By Anna Fitzpatrick, Contributing Reporter

SÃO PAULO, BRAZIL – Since the end of 2010, heavy flooding in Brazil’s financial capital has taken at least 25 lives, and caused countless economic losses. Geraldo Alckmin, the Governor of São Paulo since 2001, working with the new Rousseff administration, is now faced with perhaps the biggest challenge of his new term.

Economically, the city and state of São Paulo are top contributors to the nation’s GDP and thus the ramifications of the problems caused by the weather are far reaching.

According to the IBGE (Instituto Brasileiro de Geografia e Estatística), the state of São Paulo contributes to 33 percent of the country’s GDP.

During the heavy rainfall at the start of the year the River Tiete, which runs through São Paulo, burst its banks flooding main roads and at times, the high volume of rain has forced both airports in the city to close, resulting in 45.5 percent of planes being delayed at the International Airport Guarulhos.

Economic losses to the country as a whole following the floods in state of Rio (Região Serrana), the worst natural disaster in Brazil’s history, have been estimated to be around the R$2 billion mark. The government has earmarked at least R$780 million for rebuilding though it not yet clear how the money will be allocated.

Figures from last year show how damaging the flooding was for businesses. Research carried out by the Department of Macroeconomic Research of the Federation of Industries of São Paulo (FIESP) revealed that each month disruption from flooding costs business approximately R$1.3 billion a month.

The major challenges for companies were related to staffing and infrastructure problems such as delays in product delivery, difficulties in the transportation of products and the absence of staff.

A more immediate problem is inflation, especially pertinent in the food sector where shortages are felt immediately therefore pushing up prices.

The state of São Paulo is a major agricultural area and although the loss of life in São Paulo has been less severe than in Rio, the damage done to agriculture will have an echo effect across the country.

The state market CEAGESP was flooded during the heaviest rains. According to reports, production of certain food items fell by 20 percent during the heavy rain.

A source working in the construction industry noted how the rain causes chaos on the roads around the city and halts work on projects, not only during the rainfall but afterward while things dry out, thus creating inflationary pressure on the whole economy.

With promises of federal spending, the government of SP has started lobbying for money to spend on large reservoirs called piscinões, which are used to retain and control rainwater. The mayor of São Paulo, Gilberto Kassab, announced at the beginning of February that all the pools will be monitored electronically for flood risks.

Geraldo Alckmin, the Governor, is lobbying the government for help to build more pools with particular emphasis on the area around Franco da Rocha, an area frequently hit by flooding. The proposed plan would cost around US$200 million, creating a certain amount of stimulus in the economy.

The challenge remains to provide some relief for the short-term effects of the natural disaster, while working to provide long term solutions to prevent future infrastructure failure.