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Brazil's largest city may ration water this year, utility says

SAO PAULO (Reuters) - Sao Paulo may have to ration water this year if reservoir levels are not replenished, Brazil's largest water and sewage utility said, an increasing possibility as the southeast region heads into its dry season.

Worries of a water shortage in the metropolis of some 20 million that will host the soccer World Cup opening match on June 12 have increased amid dry weather this week, and the city's main source of water, the Cantareira reservoir, was at just 12.7 percent of its capacity as of Wednesday.

Economists worry that water rationing or shortages could take a toll on Brazil's fragile economy, which is expected to grow just 2 percent this year, and a shortage in Brazil's business hub would add to the challenges facing President Dilma Rousseff, who is expected to be re-elected in October.

The utility company, Cia de Saneamento Básico do Estado de São Paulo SA, or Sabesp, said it had turned to other water sources in the region but was running out of options.

"If the rains do not return to appropriate levels and reservoir levels are not restored, we may be forced to take more drastic measures, such as water rationing," the company said in an annual report published on Tuesday.

Sabesp just a month ago said it was not considering rationing water in Sao Paulo, saying such a measure would hurt consumers and raise costs. Some small cities in Sao Paulo state have already seen water shortages and rationing imposed.

Southeastern Brazil suffered from its hottest, driest January on record this year, damaging corn, sugar and coffee crops that Brazil exports and spurring fears the lack of rain could trigger an energy shortage as well as a water shortage, since Brazil relies on hydro-electricity.

Temperatures have remained high as South America transitions into autumn and essentially no water has fallen on Sao Paulo state in April, according to local meteorologist Somar.

Meteorologists are forecasting the El Nino phenomenon will develop later this year, which would bring heavy rains to southern Brazil but not until the second half of the year.

Poorer communities on the outskirts of Sao Paulo would likely be affected first by any water rationing. Other regions of Brazil where World Cup games will be played in June and July have not faced such an extreme drought.

Water levels are so low in Sao Paulo that rationing should have started, the PCJ Consortium, a non-profit group that monitors rivers feeding into Cantareira has said.

(Reporting by Roberta Vilas Boas; Writing by Caroline Stauffer; Editing by Sofina Mirza-Reid)

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