Between 2013 and 2015, São Paulo experienced a major drought. With drinking water reservoirs reduced to 5% of their capacity, the water supply company, SABESP, implemented measures to reduce household water consumption, while the Government of São Paulo State overruled watershed committees to prioritize the supply of water to SABESP. While attention centered on freak meteorological conditions, the management of water resources and water services also played a role; in particular the conversion of SABESP from a state company to a mixed capital company in which the State Government held a majority stake. As the crisis abated, the State Government announced measures to increase 'water security', comprising water diversion infrastructure to increase supply alongside governance reforms to improve state-led responses. This paper examines the relationship between water security and water governance in the context of the São Paulo water crisis. Most literature that analyses the governance dimensions of water security focuses on the principles of "good governance", including decentralization, transparency, and participation, which not only neglects that these can function instrumentally, but also risks ignoring the structure and scaling of the water institutional landscape within which governance takes place. We thus demonstrate how processes and structures that are broadly characteristic of "good governance" both exacerbated the effects of the drought and constrained responses to it. We make two related arguments. First, the mutually-beneficial commercial relationship between the state government and SABESP was fundamental in shaping these dynamics. Second, the drought experience, shaped by these dynamics, has legitimized a shift back towards a centralized, top-down and supply-led approach to water. This is discursively framed as envisaging future 'water security', yet serves to enhance SABESP's revenue streams, and consequently State Government finances. We thus suggest that the conventional view that good governance is conducive to water security needs to be reevaluated.

The literature on urban financialisation has prioritised the analysis of what finance does in the context of industrialised countries. This paper contributes to an understanding of what it is, and specifically how it emerges from the entanglements between the accumulation of intergovernmental debt, pricing and valuation practices – involving state and municipal utilities, regulatory agencies and consultancies – in the gradual transformation of shared into shareholder water governance in Brazilian metropolitan areas. Moreover, we provide a first illustration of how a more articulate approach between political economics and social studies of finance might contribute to an understanding of the making of urban financialisation, with a particular relevance for a context of less developed capital markets.

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