company dae). the municipal governments have responsibility for land use planning, including the elaboration of urban master plans and the control of land zoning and development. water challenges satellite picture of são paulo showing the billing and guarapiranga reservoirs completed surrounded by built-up areas. the major water challenges in the mrsp are pollution of drinking water reservoirs that are surrounded by built-up areas including slums, water scarcity and conflicts, inefficient water use, and flooding. access to water supply and sanitation, as well as service quality for users, are not among the major water challenges in mrsp. it has relatively high coverage rates compared to other urban areas in brazil: in 2004, 98.4 percent of the population had access to water through internal plumbing and 81.2 percent of the population had adequate sanitation. in general, water supply is continuous. pollution according to the water quality information produced by the state environment agency (cetesb), the principal rivers have reasonable water quality conditions in the upstream portion of the basin; however, in the downstream portion, from the border of são paulo onwards, the rivers are classified as being of extremely low quality. the quality of the guarapiranga reservoir has worsened despite the implementation of the guarapiranga pollution control program in 1992. the water quality of the billings reservoir has improved since the transfer of the heavily polluted water from the pinheiros river by the electricity company was restricted. one of the main sources of water pollution in the mrsp is the slums around the guarapiranga and billings river basins because these neighborhoods often lack adequate sanitation services. the direct discharge of raw sewage into the waterbodies has caused eutrophication in both reservoirs as well as the baixo cotia, biritiba and ribeirão dos cristais rivers. in addition, defects in the wastewater treatment system have caused wastewater to overflow into the tributaries of the guarapiranga reservoir. defects in infrastructure for collecting and transporting sewage to the wastewater treatment plants also cause problems. the dumping of industrial effluents and pesticides from agriculture has resulted in additional pollution. while the concentration of industry contributes to the water pollution problems in the mrsp, these are also a direct consequence of urbanization without the adequate infrastructure. over many years within the alto tiete basin there was a total lack of investment in sewage collection, transport and treatment systems. investments in treatment and collection network expansion were initiated in the alto tiete in the 1970s and increased substantially in the 1990s. however, as of 2005, in the municipalities within the alto tiete basin, only 65 percent of sewage is collected, and of this only 32 percent is treated. sabesp operates 8 wastewater treatment plants in the mrsp treating more than 2 billion m³ of water, representing 72 percent of the wastewater treated in the entire state. however, in guarulhos, the second largest population of the mrsp, there is no wastewater treatment. overall, only 47% of the wastewater collected in the metropolitan area is being treated. the largest wastewater treatment plant is located in guaraú on the tiête river downstream of the city. the wastewater is channeled to the plant through interceptors along 60 km of the river. in addition, while the mrsp has reasonable rates of collection and disposal of domestic solid waste, the amount that is not collected or disposed of inadequately (700 metric tons of trash) is still significant in absolute terms as it is often disposed in the region's water bodies. poverty and inappropriate land use approximately 16 percent of the population of the mrsp is poor. the vast majority of the almost two million residents in the guarapiranga and billings river basins are poor. they illegally occupied these areas given their proximity to the city center, notably the industrial and commercial areas along the banks of the pinheiros river that joins the tietê river in são paulo. this expansion of the population to the basins around the reservoirs has occurred for several decades, and various attempts to regulate urban expansion to protect water sources have been unsuccessful. to protect strategic sources for urban water supply, the state headwater protection law, passed in the 1970s, prohibited high-density residential occupation in 53% of the mrsp. the law was not enforced effectively. industries were prohibited from the protected areas because they were not able to obtain commercial and industrial permits; however, since the informal economy could circumvent the law, and these forms of expansion were the hardest to monitor and regulate, the poor moved into these areas. uncontrolled and disorderly occupation in the guarapiranga and billings reservoirs took place without adequate water and sanitation services in precisely those areas where water source protection was the most important. the informal settlements and slums have become part of the urban landscape and they cause direct pollution of the reservoirs through wastewater and garbage discharge and storm water run-off and silting, thus threatening their future as water bodies for potable supplies and other uses. water scarcity water sources. surface water accounts for about 80% of water use in the mrsp, and groundwater for 20%. the state water utility sabesp and municipal utilities obtain all their water from surface water. the annual water availability of the alto tietê is just 201 m³ per capita, which is lower than in the driest state of the brazilian northeast. the são paulo council on water resources has defined watersheds as being in critical condition when the relationship between demand and availability surpasses 50 percent. according to this definition, the alto tietê is in the most critical condition of all the twenty-two watersheds in the state of são paulo, with a demand/availability ratio of 442 percent. there are eight production systems that supply drinking water to the 19 million people that live in the são paulo metropolitan area. all of these suffer from problems of degradation resulting from sewage pollution, deforestation and uncontrolled urban expansion in watershed areas. the main systems are the cantareira, guarapiranga and billings systems which together provide the water consumed by 70% of the population. smaller interbasin transfers to the alto tietê come from the capivari and guaratuba rivers. the cantareira system, an interbasin transfer, supplies nearly half the water for greater são paulo (31 m³/s). it is one of the biggest drinking water production systems in the world. the system is formed by six reservoirs in five basins located in the serra da cantareira to the north of greater são paulo in the states of são paulo and minas gerais, covering twelve municipalities, as well as the guaraú water treatment plant. several areas within the system have suffered deforestation, which affects the natural water production capacity. another problem is the increasing rate of urban settlement around the reservoirs, leading in most cases to water contamination from sewage. nevertheless, overall water quality from the cantareira system is good. the last time the transfer from the cantareira system has been renegotiated for another 10 years was in 2004, under difficult circumstances. an expansion of the volume of this transfer is not deemed to be possible. the guarapiranga reservoir, which is exposed to pollution, supplies drinking water to nearly four million people. the guarapiranga basin supplies water to nearly four million people, mainly in the south-western part of the city of são paulo. it is more than a hundred years old and has become the most endangered basin in the greater são paulo area. its main problems are uncontrolled urban expansion with no basic sanitation and widespread use of the basin for economic activities, threatening natural water production. the billings reservoir was constructed to provide power supply to the new emerging industrial são paulo in the 1930s. it is one of the biggest metropolitan water reservoirs in the world, but due to inadequate urban planning and the lack of wastewater treatment in the mrsp, it became heavily polluted during the 1980s. in the 1990s, environmental control over the reservoir became more restrictive and the water quality improved. as of 2009, the billings reservoir supplies water to over two and a half million people. its main source of pollution is the pinheiros river, whose water has been pumped into the billings basin for over sixty years in order to provide water for the hydropower generation. the billings reservoir also plays an important role in flood control for the mrsp. urban settlements in the area with no basic sanitation and extensive land use have also jeopardized water quality in the basin. since 2000, part of the billings water supply has been sent to the guarapiranga reservoir in order to complement its water production capacity. hydropower production, potable water supply and flood control are conflicting uses for the billings reservoir. both the guarapiranga and the billings basin face serious water quality issues due to the extensive presence of urban slums with no sewage or solid waste collection system. the banks of the basins were originally designated as environmentally protected areas, but they were quickly invaded by poor immigrants to the metropolitan region in search of work and opportunity. during the 1990s the population on the banks of the billings grew by over 50 percent, resulting in the deterioration of the environmentally protected areas in the vicinity of the headwaters. these highly unequal and disparate types of urban occupancy have limited or no basic urban infrastructure, and people live in shacks built on steep hillsides, in valley bottoms, flood-prone areas, flood plains or perched along the banks of rivers and streams, with limited or no access to proper sanitation. there are also conflicts over water use with hydropower production. groundwater is used by industries (35% of wells), private homes and apartment buildings (25%) and services (24%). the amount of groundwater recharge and abstraction is not well known, but its recharge is estimated at 15m3/s and extraction at 10m3/s, and it is expected to increase. the increasing use of groundwater is a result of sabesp's pricing policy that is not conducive to conservation and a lack of monitoring and control of groundwater use. in municipalities where water and sanitation is supplied not by sabesp but by local government, the government's lack of ability in expanding water supply exacerbates the exploitation of groundwater resources. there is a high threat of groundwater contamination, especially in the eastern part of the alto tietê. water demand. water demand in the alto tietê in 2004 was as follows: municipal water demand industrial water demand irrigation water demand total water demand 68.50 m³/s 14.33 m³/s 3.59 m³/s 86.42 m³/s water conflicts in the alto tietê there is growing conflict between drinking water supply and irrigation. only one sub-basin of the alto tietê can expand its potable water supply from the current supply of 10 m³/s up to 15 m³/s. in other water basins serving the mrsp this is not the case. for example, in the guarapiranga and billings basin there is also a conflict with hydropower production. the second state water resources master plan, approved in 2009, focuses on the conflict over water use. inefficient water use the level of non-revenue water in the mrsp is estimated at 40%, meaning that 40% of water supplied to the network is either lost through leakage or, even if delivered to customers, is not being billed. in the municipalities served by sabesp the level of nrw is only 28%, while it is more than 50% in some of the municipalities that are directly in charge of distributing water that is supplied to them in bulk by sabesp. flooding the densification and verticalization of urban settlement have resulted in increased impermeability of soils. specifically, urbanization has led to the impermeability of 37% of land within the alto tiete basin. the result has been that urban areas are both the causes of increased flooding and its main victims. since 1998, a macro-drainage plan for the alto-tiete basin has been under preparation in order to diagnose existing and expected problems and devise solutions from a technical, economic and environmental perspective. however, the problem is one of land-use planning, which is the responsibility of the municipalities, even though it affects water resource policy, which is a responsibility of the state. approaches to address the challenges there have been many joint efforts by brazilian authorities, often with the support of multilateral lending agencies, to tackle the water and poverty challenges in the