"Although procedures for pricing "retail" distribution have been established for a long time, methods for pricing bulk or "wholesale" water supplies are still evolving." How to finance the infrastructure and service of bulk water supply, and how to use pricing to achieve efficient allocation and use of water as a resource are the central issues that emerge from discussions about bulk water pricing. Efficiency will lead to allocating water resources better, reducing water losses caused by poor maintenance of the supply systems, and increased monitoring of water quality. At first glance, Brazil may not appear to be a relevant country from which to draw lessons in distributing scarce water resources, since it contains 12 percent of the world's fresh water supply. However, with its vast territory and issues of regional drought and population explosion, Brazil provides a unique environment in which to demonstrate how adequate pricing of bulk water on a regional level can help allocate water efficiently. This paper offers a framework for bulk water pricing reform and examines the lessons from recent analytical work and practice in Brazil, as well as relevant international experience. It then offers recommendations for the development of both water pricing and allocation policies to facilitate continued implementation of bulk water pricing in Brazil.
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