|The Mega-city in Latin America (UNU, 1996, 282 pages)|
|10. São Paulo: A growth process full of contradictions|
As the problems of the metropolis are increasing, the local authorities are facing greater problems in confronting them. In 1974, the federal government created new administrative agencies for the country's nine metropolitan areas. It was hoped that these new agencies would be much less bureaucratic than the existing local government structures. The new agency for São Paulo, EMPLASA (the Metropolitan Agency for Greater São Paulo), was effective but it took over responsibility only for transportation and for management of the region's water resources. This left the municipalities to address all the other serious problems, with only limited help from the state and federal governments.
The 39 municipalities which make up the metropolitan region receive half of their revenues from higher levels of government (in 1990, 5.6 per cent from the federal government and 45.1 per cent from the state government) and generate the rest themselves. The municipal financial situation has deteriorated recently, owing to the economic recession and the increasing numbers of under- and unemployed workers. The federal government transfers part of its income tax and industrial value-added taxes into a Participation Fund. This fund, which accounts for 17 per cent of federal revenues, is divided between the municipalities on a per capita basis. The smaller municipalities gain most of their revenues from this source; larger authorities are better able to supplement this source of income from their own tax base. The State of São Paulo transfers funds to the municipalities from its taxes on commerce, services, and vehicle ownership. The municipalities' own revenues are derived from taxes on land and property, property transactions, sales of petroleum and other lubricants, and professional services. In 1990, the tax on services (ISS) generated 60 per cent of the municipal tax revenue in the metropolitan region; the taxes on land and property a further 19 per cent (EMPLASA, 1992). The other significant source of revenue in the past has been foreign loans, a fact reflected in the current cost of interest payments, which absorbed 6 per cent of the budget in 1990 (EMPLASA, 1992).
Municipal expenditures have been growing fast in the area of public works and falling in the social sectors. This has been particularly marked since the beginning of abertura, when political attention focused on transport subsidies and on the maintainance and renovation of roads. Whereas the budget for education, health, and housing fell by US$600 million between 1993 and 1994, the cost of building a tunnel under the River Pinheiros raised the road budget by 185 millions. The latter project is likely to cost the municipality of São Paulo US$3 billion over the next few years and a major question must be asked about the social benefits to be derived from this scheme.