MS Risk Blog

Rio de Janeiro Declares Financial Emergency Ahead of Olympics

Posted on in 2016 Summer Olympics - Security Update title_rule


06The governor of Rio de Janeiro has declared a state of financial emergency ahead of the Olympics, which are set to begin in August, stating that emergency measures are needed in order to avoid “a total collapse in public security, health, education, transport and environmental management.”

The acting governor, Francisco Dornelles, has classified the situation in the Official Gazette as a “financial calamity” that could prevent “the fulfilment of the obligations as a result of the Olympic and Paralympic Games Rio 2016.” This however is in part a political tactics as by declaring a state of financial emergency, the government is able to borrow funds without approval from the state legislature. The interim president, Michel Temer, has reportedly already agreed to disburse federal funds to cover Rio’s shortfall and to ensure that the Olympics go ahead as planned.

The impact however remains to be seen. Most of the Olympic projects are funded by private companies or Rio City, which is in a stronger financial position, as opposed to Rio state. With the exception of the velodrome, the main sporting venues are either already completed or are on schedule for completion. However Rio State is responsible for the MetroRio extension, which is already very late and which is now due for completion just days before the start of the Games, when it will be needed to alleviate the usually dire traffic to Bara de Tijuca, the site of the athletes village and Olympic park. Rio State was also supposed to clean up the sewage and other pollution in Guanabara Bay, which will stage the yachting events. However officials have stated that this is now impossible due to a lack of funds, which effectively means that Olympic sailors may have to dodge plastic bags, human excrement and other waste. Also of great concern for the 500,000 visitors who are expected for th Games is the cut in the public security budget, which has added to the problems faced by the favela “pacification” programme and contributed to a resurgence in violent crime. I also comes amidst warnings that terrorists could target the event.

City Mayor Eduardo Paes however has insisted that the state of emergency would in no way impede Rio’s ability to meet its Olympic commitments and stage an “exceptional Games.” He stressed that the bulk of the bill for the event was being paid by the municipality and not the state, adding, “the city of Rio is in good shape financially…Even in a time of crisis, we keep pushing. We inaugurate things almost every week.”

The plea for additional funds, which comes 49 days before the official start of the games, is an embarrassment for the host of South America’s first Games and adds to a long list of issues, which include the impeachment of the president, the deepest recession in decades, the biggest corruption scandal in memory, the Zika virus epidemic and a wave of strikes and occupations of government buildings.

Analysts have reported that Brazil’s economy this year is expected to shrink by about 4%. This is due to weak commodity prices, low demand from China, political paralysis and the Lava Jato (Car Wash) corruption investigation, which forced the suspension of many construction contracts and which led to the arrest of dozens of senior executives. Rio de Janeiro has particularly been hard hit because it is the headquarters of the state-run oil company Petrobas, which is at the centre of the investigation.   Faced by falling tax revenues, the state government has slashed health, police and education budgets. Teachers and doctors have faced lengthy delays in receiving their salaries, which has prompted strikes and occupations of schools and hospitals.

Tagged as: , ,