This study examines how environmental issues have been addressed in the water sector in Brazil, within the context of activities of the Federal Government, generally, and those implemented under Bank sector operations, in particular. The core focus of the study lies in the management of water quality, as it affects both the users of raw water, and those who are primarily concerned with the disposal of wastewater. The report considers the following three sectoral areas concomitantly - water resources management, water supply and sanitation, and, the environment - thus limiting its review, and focus to those themes which are key to the over-arching issue of water quality. Water resources management in the country relied upon heavy investments in medium, and large scale projects that provided basic infrastructure for water uses. However, these have produced questionable impacts in terms of reducing poverty, and inequality. One of the reasons for this, has been the poor infrastructure management, which despite its importance, has been largely underestimated. While improvements in the utilization of existing infrastructure in the water sector remain critical, it needs to be complemented by incentives to both service providers, and water users. Moreover, low economic, environmental, and social returns from investments in the water sector, reflect the tendency to distract attention from the objectives in the design, and implementation of projects. Thus, an assessment of water quality goals is required, which should be based on systematic evaluations of the costs, and benefits of reaching alternative standards, and explicit social objectives.

The Central Valley in California (USA) covers about 52,000 km² and is one of the most productive agricultural regions in the world. This agriculture relies heavily on surface-water diversions and groundwater pumpage to meet irrigation water demand. Because the valley is semi-arid and surface-water availability varies substantially, agriculture relies heavily on local groundwater. In the southern two thirds of the valley, the San Joaquin Valley, historic and recent groundwater pumpage has caused significant and extensive drawdowns, aquifer-system compaction and subsidence. During recent drought periods (2007–2009 and 2012-present), groundwater pumping has increased owing to a combination of decreased surface-water availability and land-use changes. Declining groundwater levels, approaching or surpassing historical low levels, have caused accelerated and renewed compaction and subsidence that likely is mostly permanent. The subsidence has caused operational, maintenance, and construction-design problems for water-delivery and flood-control canals in the San Joaquin Valley. Planning for the effects of continued subsidence in the area is important for water agencies. As land use, managed aquifer recharge, and surface-water availability continue to vary, long-term groundwater-level and subsidence monitoring and modelling are critical to understanding the dynamics of historical and continued groundwater use resulting in additional water-level and groundwater storage declines, and associated subsidence. Modeling tools such as the Central Valley Hydrologic Model, can be used in the evaluation of management strategies to mitigate adverse impacts due to subsidence while also optimizing water availability. This knowledge will be critical for successful implementation of recent legislation aimed toward sustainable groundwater use.