Economic impacts of natural disasters in megacities: The case of floods in São Paulo, Brazil

• Floods result in a reduction in the rate of city growth and of residents' welfare.
• Floods hamper local competitiveness in domestic and international markets.
• Economic effects are not only local: they spread through production/income linkages.
• There is a need to consider both internal and external interactions of the urban system.
• The paper considers potential coordination problems in the search for a solution.

The city of São Paulo, home to 11 million people, suffers constantly the effects of flooding caused by extreme precipitation. Localized floods occur every summer in various parts of the city. Besides the losses and inconvenience felt by the residents, floods produce damages that cross the city boundaries, affecting income and output in the metropolitan area as well as in other parts of the state and the country. The objective of this study is to evaluate the economic impacts of floods in the city of São Paulo through the use of a Spatial Computable General Equilibrium (SCGE) model integrated to GIS information related to the location of points of floods and the firms within their influence. It is estimated that floods contributed to reduce city growth and residents' welfare, as well as hampering local competitiveness in both domestic and international markets. An intra-city total impact-damage ratio of 2.2 and an economy-wide total impact-damage ratio of 5.0 were found.