Seven years ago in October 2009, Brazilians became the host of the Summer Olympic Games 2016, beating out Tokyo, Madrid, and Chicago. Indeed, it was a high moment for Brazil and a signal to the rest of the world that Brazil is growing and so is its influence. World leaders applauded the biggest economy and the largest country of Latin America for its robust economic growth, its reduction in inequality, and its thriving democracy. It reaffirmed the reputation of Brazilian government as a leader among other emerging economies. After the announcement, the government declared a public holiday and a massive party broke out on Copacabana Beach.
Brazil had full rights to celebrate because while the rest of the world was buried in the consequences of the global financial crisis, Brazils economy was impressively growing at a higher rate. Its exports of oil, minerals, and agricultural commodities were in high demand. Unemployment was down historically, and upscale shopping malls were filled with a growing middle class.
However, as Brazilians are about to cut the ribbon on the Summer Olympics on Friday, they are in no mood for a party. Currently, they are facing political turmoil, economic turmoil, and social chaos. The economy shrank 3.8 percent in 2015; the largest drop since 1990. It is also expected to shrink further 3.7 percent to 4 percent in 2016, and Brazils debt rating has already received junk status by Moodys in May. Businesses have cut investments, and seven million jobs have disappeared since early 2015. Violent crimes, mainly robberies in the streets of Rio, rose 14 percent from January to May. As per media reports in 2015, there were 48,700 muggings in Rio - almost three times the number in New York City. Multiple corruption scandals have rocked the government, with President Dilma Rousseff suspended and facing impeachment.
Two months before the Olympic Games, Rio de Janeiro has become bankrupt and the states finances are in calamity. The central government had to lend $849 million to the state to cover Olympic-related infrastructure and security costs. The health crisis due to the Zika virus is the worst health crisis of the country since 1918, as per the Ministry of Health. To make the matter worse, the price tag for the Games has reached above $20 billion, as per the estimates of the Council on Foreign Relations, and it will certainly top $25 billion, which is $10 billion more than the $14.45 billion budgeted originally.
Things are not going to get better anytime soon. Most countries who have hosted these games have seen a surge in economic activities related to higher public spending on infrastructure development, housing, transportation, and other stuff related to the Games. But, economists believe that in the case of Brazilian economy of more than $1.5 trillion, the Olympic spending might not be able to make any significant impact. They also argue that it is highly unlikely that there would be any post-Olympics investment boom or the sudden eradication of Zika virus. Even if that happens, it would not be enough to bring the economy back on track.
Nevertheless, if the Olympics run without a hitch and Brazilian athletes perform well, it will improve business and consumer confidence, which might help in post-Olympics economic recovery. As Alberto Ramos, a senior economist at Goldman Sachs wrote, the soaring Olympic spirit will also help lift the animal spirits of the Brazilian economy and bring it back to the podium reserved for the top performers."
Comments
Comments are closed.