From the Viewsroom

When winning is losing

Gayathri G | Updated on January 20, 2018

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Will the dazzle of hosting the Olympics dim Brazil’s economy?

Despite the obvious attraction of the Olympics, the cost factor is a troubling matter. A recent report about Rio de Janeiro declaring a “public calamity” over finances ahead of the games should make us cringe at the details of the risks involved.

The August Olympics and September Paralympics in Rio de Janeiro will be the first to be held in South America. Typically, the country hosting the games is expected to make huge investments in improving infrastructure (hotels, travel connectivity, stadia, etc) . While this would pressure the country’s budgetary reserves, it could well also boost its tourism prospects.

Back in 2010, when Rio successfully bid for the Olympics, everything about Brazil was sparkling: it had a stable economy and political environment, steady currency, a peaceful democratic government, oil off its coast... But in recent years, Brazil’s economy has been in the doldrums. The country is mired in a recession that is its worst in the last 25 years, GDP has been shrinking, and there’s double-digit inflation. There’s been a fall in global oil prices, delayed pay cheques for government servants, people have taken to the streets calling for the president to be impeached, there’s corruption in real estate, and a rising unemployment rate (a record 11 per cent).

Rio’s state budget shows a $5.6-billion shortfall for 2016. Royalties from oil, the main revenue-earner, are projected to plummet from $3.5 billion in 2014 to a mere $1 billion this year. After much pleading, Rio received nearly $300 million from the federal coffers to extend its metro network. That the federal budget itself is in bad shape is a matter of concern. Brazil’s fiscal deficit is pegged at around $47 billion. How will it pull off the games without going bankrupt? For Brazil, it seems winning is losing.

Chief Sub Editor

Published on June 23, 2016

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