Despite Brazil's constitutional commitment to housing for all, the country's most populous city—São Paulo—has only experienced a growth in the number of slum dwellers and a decline in municipal investments in slum upgrading. Development literature suggests that this dilemma reflects the capacity and/or will of interested parties in building fiscal space to address poverty problems. However, this study asks whether the questions asked in such literature are sufficient in explaining why poverty reduction projects and development investments like slum upgrading are losing ground in places like Brazil. What are the fundamental assumptions and privileges inherent in current development debates and how do they influence planning outcomes?

The hypothesis presented here is that the current interpretation of fiscal responsibility and practices of public sector accounting reveal a fundamental bias against social investments like slum upgrading. Using the city of São Paulo's municipal financial statements between 1995 and 2005 for empirical evidence, I argue that the for-profit motivation shaping current public sector accounting practices often leads to a decline in much needed social investments. In short, what is captured in accounts, how it is captured, and what is not captured all matter. Secondly, current accounting practices energize an unproductive cycle in which perverse adaptations of "fiscal responsibility" on the local front are increasingly fed by and feed stringent administrative guidelines at the national and international levels. This perverse cyclical dynamic and decline in social investments critically hamper planning for and the realization of development goals—all while creating an illusion of fiscal responsibility—and an incomplete vision of fiscal responsibility at that.

Though of course political struggles and strategic visions of economic development are key shapers of policies affecting slum upgrading, decision making processes and scholarly debates in such development planning projects increasingly rest on what are termed hard data. Accounting practices produce and report this data and in doing so influence the scope of what is deemed fiscally possible and appropriate in development planning. As São Paulo reveals, planners must reexamine current accounting practices, the effects of interpretations of fiscal responsibility, and the resulting often deceptive hard data.