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Calamity Janeiro
A state financial crisis is another threat to the games
RIO DE JANEIRO does not look like a disaster zone. Beaches are emptier than normal, but that’s because temperatures have dropped to a frigid 23°C. The streets are bustling. Yet on June 17th the acting governor of Rio de Janeiro state, Francisco Dornelles, decreed a “public calamity”. It will, he warned, affect the state’s ability to support the Olympic games, which are to take place in its capital city in August.
The calamity is financial, not natural. Brazil’s recession has caused tax receipts to plummet. Falling oil prices have pulled down royalties, which provided more than a tenth of Rio’s revenues. The budget deficit this year is expected to exceed 19 billion reais ($5.6 billion), a third of revenue.
Luckily for sports fans, the games are mainly the responsibility of the city, which is in better fiscal health. The arenas are nearly ready. But the state is in charge of policing and of the metro line linking the Olympic village to the city centre, which is unfinished. Tourists worried about the mosquito-borne Zika virus, which causes birth defects, have another reason to fret.
The state compounded its woes by raising salaries and pensions during the oil boom and giving big tax breaks to businesses. Lately it has been paying policemen, teachers and doctors in arrears—or not at all. The Rio city morgue, run by the state police, did not accept corpses earlier this month because it could not pay for cleaning (it sent them to other cities).
Rio is not the only state in trouble. Since 2010 regional debts,owedmainly to the federal government, have ballooned by a third in real terms, reaching 11% of GDP. Michel Temer, who is serving as Brazil’s interim president while Dilma Rousseff undergoes an impeachment trial, thinks something good can come of the crisis. On June 20th he reached a deal to restructure states’ debts. In return, they agreed to apply a proposed constitutional spending cap to their own budgets. This will reduce Rio’s shortfall this year by 5 billion reais.
The declaration of a calamity allows Mr Temer to give the state a further 2.9 billion reais for security, which will release money to complete the metro line. That may spare Rio Olympic embarrassment, but it still leaves a huge hole in the budget. “What happens after the Olympics?” wonders a cleaner at the morgue, who returned to work in mid-June, when payments to her firm resumed. Mr Dornelles is no doubt asking himself the same question.
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