Metropolitan Governance and Finance in São Paulo

With a population of 11.2 million residents, São Paulo is the largest city in Brazil, the largest city in the southern hemisphere, and the world’s seventh largest city by population. The city is anchored to the São Paulo metropolitan region (SPMR), which with 20 million dwellers is among the five largest metropolitan areas in the world (Olinto 2011). The city is the capital of the state of São Paulo, the most populous Brazilian state, and exerts a strong influence in commerce, finance, the arts, and entertainment throughout Brazil and Latin America.

The SPMR was created in 1973, though São Paulo state had previously created administrative regional bodies in the late 1960s. The 1973 SPMR now comprises 39 municipalities, including the municipality of São Paulo. As one of the world’s prominent metropolitan areas, São Paulo has undergone significant challenges and transformations. The city has experienced a decline in its manufacturing base, with significant impact on incomes and living conditions for the people of the metropolitan area. As the SPMR seeks to reinvent itself, it must rely on metropolitan governance structures that provide little authority and coordination and on fiscal systems that are tied to the past. The São Paulo municipality has to take steps to address the city’s increasing debt. The São Paulo metropolitan region is addressing key issues of effective planning, fiscal management, and delivery of services to support the work force, technical and research centers.

This paper looks at São Paulo’s recent past to understand how metropolitan governance and finance have affected the development of this region and contributed to its challenges. After some background on the SPMR, its history, and recent economic changes, the paper considers how metropolitan areas fit into the governance structures of Brazil and the impact this has had on the SPMR. A discussion of fiscal issues and management follows, with a snapshot of the SPMR as a whole and a discussion of fiscal data and expenditure management related specifically to São Paulo municipality. Then, after a look at some special financial tools that have been created to address specific needs, the paper concludes with challenges going forward and thoughts regarding how they might be addressed.

This paper was presented at a 2011 conference at The Brookings Institution organized by the Lincoln Institute of Land Policy and is Chapter 12 of the book Financing Metropolitan Governments in Developing Countries.