Shaping Brazilian Water Policy Using System of Environmental-Economic Accounting and Environmentally Extended Input-Output Matrix

Brazil holds approximately 12% of the world’s surface freshwater, positioning it as a water-rich country. However, climate change and growing demand exacerbate water security challenges across Brazilian river basins, placing increasing pressure on economies reliant on water resources. Managing multiple and competing uses in this context is complex, especially in water-scarce regions where priority and non-priority demands must be balanced. Growing attention is therefore directed toward indirect water use embedded in supply chains, as it provides a clearer picture of the sectors and trade flows exerting the greatest pressure on water availability. This study identifies the main direct and indirect contributors to Blue Water withdrawal for consumptive use by estimating Virtual Water and Water Footprints, and evaluates their impacts on quantitative water balance, value added, and employment from a watershed perspective in Brazil. We integrate the System of Environmental-Economic Accounting for Water (SEEA-Water) with an interregional Environmentally Extended Input-Output Model (EE-IOM) at the river basin level, covering 24 economic sectors in 2017 three different regions: for the Grande and Paraíba do Sul Basins and the rest of Brazil. Results reveal significant water stress, with restricted water balances of 13% in the Grande and 9% in the Paraíba do Sul Basin. These critical conditions are primarily driven by Blue Water withdrawals linked to interregional trade, which exerts greater influence on water balance criticality than international trade. In the Grande Basin, 80% of water withdrawals are allocated to exports (50% interregional, 30% international), while in the Paraíba do Sul Basin, 74% of withdrawals support exports (61% interregional, 14% international). Findings also show that water-intensive production and trade generate relatively low value added and employment, underscoring inefficiencies particularly relevant in water-restricted regions. These insights highlight the need for policies that go beyond regulating international trade to also address interregional flows, and to support the design of water pricing mechanisms, sectoral reallocation strategies, and efficiency improvements. By reconciling economic development with sustainable water use, such measures can strengthen resilience and promote equitable growth in Brazil’s water-stressed regions.