Rio Declares State of Financial Emergency Ahead of 2016 Olympics

Rio de Janeiro. Foto: Colourbox

Foto: Colourbox

21.06.2016

By Mads A. Wickstrøm
State governor, Dornelles, declared a state of financial emergency, on Friday June 17th, asking for federal funds to help fulfil public obligations, as the state of Rio de Janeiro struggles with economic recession prior to 2016 Games.

In an official decree, Francisco Dornelles, Rio de Janeiro´s acting governor, declared a state of financial emergency less than two months before the Olympic Games. The state of Rio de Janeiro is heavily dependent on royalties from the petroleum industry, but revenue has been declining due to continuous international drops in oil prices. According to financial officials in Rio, the state deficit for 2016 will reach an estimated 19 billion reais ($5.56 billion).

Rio’s state government has been struggling to pay public salaries and pensions. Public institutions, such as police departments and hospitals, have been complaining they lack basic supplies which has forced them into asking private donors for help. Furthermore, receiving funds for the completion of the new metro line is proving a difficult task for the state government, as international creditors are reluctant to provide the necessary loans. Rio de Janeiro’s debt rating was recently downgraded from B+ to B- by Fitch Ratings.

The heaviest expenditure for the state government is security. The state has increased spending, since 2008, as a result of a “pacification” policy, installing armed police bases in favelas in order to increase security ahead of the 2014 World Cup and 2016 Olympic Games.

However, the rate of violent crime in the city of Rio de Janeiro has been increasing in recent months along with concerns over the overall state of security ahead of the Games. Rio state Finance Minister, Julio Bueno, claims that Olympic security will not be compromised, as it is a federal government responsibility.

“Most of the resources, funding equipment and manpower comes from federal [government],” Bueno said. 

The governor spoke to Michel Temer, Brazil’s interim president, asking for financial aid from the federal government. Temer said that the federal government would be willing to support financially in order to ensure a successful Rio 2016 Games. According to public officials, Donelles asked Michel Temer for nearly 900 million dollars in emergency funds for the state government. On Friday the 17th of June, Brazilian media reported that president Temer had approved the decree as a tool to free up 850 million dollars of emergency government money.

A Washington Post article about the financial calamity in Rio can be found here

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