This article examines the implementation of a bulk water pricing system in the Paraíba do Sul River Basin (PSRB) in southeast Brazil. It argues that four primary factors explain the successful negotiations for water prices in the basin. First, the negotiation process itself was inclusive and open rather than being imposed from the top down. A combination of market factors and state control (in the form of direct involvement of a federal agency) created a necessary balance in setting prices as it simultaneously allowed for powerful industrial sectors to negotiate favorable terms and for state and societal actors to offset the dominance of certain users over the negotiation process. Second, participants successfully demanded that the collected funds be reinvested in the basin rather than absorbed and spent elsewhere by the federal government. Third, a worldwide paradigm shift for water management, including the notions of water as an economic good, decentralization, societal participation and sustainability shaped the actions of key groups within the basin. Fourth, the level of technical capacity in the basin which reached back several decades provided the necessary foundation and support for the process to move forward. Committee members largely agreed on the primary problems facing the basin and on the necessity of implementing a bulk water pricing scheme in order to rectify them.

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