Any concern about Rio de Janeiro Olympic Games? Our economic editor, Jacopo Valentino, used to live in the South American Giant for many years. He give us a complete picture of what could happen down there.

 

Rio de Janeiro has declared it is in “state of emergency” situation. How serious is this, and what does this really mean for the people and for visitors?

Well… when I hear the expression “state of emergency” or something like that my mind conjures pictures of tanks in the streets, curfew times, people hoarding food and cars queuing to leave town. But this is not Hollywood, and the expression in Brazil means basically nothing. Much ado about nothing.

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The emergency has no direct impact for the population or for athletes. There will be no curfew or anything like that. This state of emergency thing is basically a trick for negotiating a financial situation. You see, Brazil is a federal republic, with the state organized in federal, state and municipal levels. Who’s hosting the Games is the city of Rio, who’s declared the “emergency” is the state of Rio (they share the same name). The state of Rio is high in debt, and running a huge budget deficit.  Now, there are limits for that, and once that limit is reached the state is forced to cut its spending. In this case the state called for an emergency, claiming the Olympic Games weighed down their budget, and that if they were to cut their spending now, the Olympics would be endangered.

And is it true?

Sort of…  the budget for the Olympics was a separate one. And the whole issue is much more linked with oil prices and the crisis of Petrobras. The oil price spike above 100 USD/bbl and the colossal investment program at Petrobras over the last decade made the state revenues boom. As you can imagine, spending followed suit. Now both the oil and Petrobras capex have collapsed, bringing havoc to the state finances.

So, there is little true in the claims…

Well, the Rio State is using the Games in order to gain some leeway in its negotiations with the federal government. Now, it is true that cutting spending may bring some headaches. While the federal government basically controls the bulk of the money flow, states are responsible for several things, including sanitation, and most importantly, the police force. The police went on strike recently due to lack of payment. And that is not something you are pleased to hear, given Rio’s already worrisome crime rates.

So there will be no cops around to protect tourists?

That’s the threat… but, I don’t think this will materialize. It is a pressure game, but I believe that in the end they will negotiate and make things work. You see, Brazil is rather self-centered and politicians in general could not care less for the image of the country abroad. So many of them are using the situation to put pressure on the federal government, with theats or disaster prophecies.

One must keep in mind that the Olympic Games was an idea brought about by the Lula, then embraced by Dilma and sold by the official media as a huge victory for Brazil. Something good and helpful (even though nobody ever cared to explain exactly why). So it is a “federal” initiative by a former president and fostered by the current president who has just been outed (at least on a temporary ad referendum basis). So now the Games have no political father – or mother…

On the contrary: amid the avalanche of scandals of corruption and misgovernment, the Games have become unpopular. They are seen – by and large – as just another example of money spent with no clear purpose by a government that has lost touch with reality, whilst more stringent needs like health care or education are left uncared for. So it is clear why no politician will be seen cheering…

 

Ouch… that sounds like a bad climate for athletes…

Yes, in theory. But Brazil is not about theory. Quite the opposite. It is a country run on cordiality (for good or bad…). So I believe Rio will make a nice event. Not the most impressive. Not the most organized. Not the most high-tech. There will be the occasional embarrassments here and there. But I am sure that in the end people will love it. Nobody is as good at throwing a party as Brazilians.