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Sunday, February 18, 2018

Olympics threatens to finish the economy of Brazil

The opening of the Olympic games in Rio de Janeiro is on the background of acute economic and political crisis. Big-time sports has made to the development of this crisis a significant contribution. As “big budget,” Brazil will affect the Olympics and what is the overall economic future of this member of the BRICS and one of the most important partners of Russia in Latin America?

Problems in the Brazilian economy began in the period of preparation for the world Cup 2014, which required a considerable strain public finances. But the massive cost of the Olympics contributed to a further increase of the deficit of the Brazilian budget and the national debt. Perhaps, this is the first time in many years when the host country of the Olympics coming to its launch in such poor condition.

Football referee

“If in 2008 the championship in Brazil was welcomed by 79% of citizens of the country, six years later, their share had fallen to 48%”

About these problems, experts have warned the government of Brazil two years ago, when that country hosted the world Cup. All in world sports history of the last decades it is almost a unique case – when the two biggest sports events are held in a country with an interval of only two years. The only analogy, the United States, where in 1994 held the world football championship and 1996 summer Olympics in Atlanta. But the scale and level of economic development of the States, of course, is not comparable with Brazil.

The first signs of economic slowdown emerged in 2013 when GDP of Brazil, according to Tradingeconomics, declined to 2.46 trillion from the previous year’s level – 2,615 trillion, the highest in the history of the country. Although at the same time Brazil’s GDP even showed a symbolic increase of $ 5 billion, pre-crisis symptoms in the economy continued to grow. In June began mass protests, the immediate reason for which was the increase in prices for public transport, but among the main points of discontent have included huge expenses for construction of objects of world football Championship. If in 2008, according to exit polls, the championship in Brazil was welcomed by 79% of citizens of the country, six years later, their share had fallen to 48%.

The previous 2010 world Cup was held in traditionally non-football country – South Africa. And cost her only $ 4 billion, while the championship at home, “wizards ball” pulled 11,63 billion dollars. The usual statements by the authorities that a sports festival is an opportunity for the development of infrastructure, ultimately did not agree with reality, because a number of announced projects in the sphere of the same transport was not completed or not started, and the majority of the budget went into new stadiums. The only thing that could justify the inefficiency costs is the victory of the Brazilian national team at the home championship, but instead came the scandal: in the semi-finals of the 2014 world Cup Brazil lost to Germany with the indecent account 1:7, then lost to the Dutch in the match for third place.

In 2015 Brazil’s economy had entered full crisis – GDP fell by 3.8%, showing the worst dynamics in the last quarter century. For the current year, the IMF predicted the same decline, though recently improved its forecast to minus 3.3% of GDP. “The slowdown in investment, rising household debt, accelerating inflation and high unemployment” – that characterizes the state of the economy of Brazil, the rating Agency Moody’s, predicting that the credit rating of the country will remain weak for a long period of time (at the moment he is Ba2 with a negative Outlook).

Prestige at any cost

The total cost of preparations for the Olympics in Rio were comparable with the budget of the football championship. Reuters survey, it is about 12-14 billion dollars. However, if on the eve of the 2014 world Cup the Brazilian budget more or less kept the sports load, then a few months before the Olympics, the country’s financial situation deteriorated sharply.

By the end of 2015, the budget deficit of Brazil amounted to 28.8 billion dollars, increasing by almost seven times (indicator 2014 17.2 billion reais, or $ 4.3 billion). Plugging a hole accounted for by external borrowing – in the past year the national debt of Brazil reached a record level at 66.2% of GDP, having increased by 9%.

Last autumn the international rating agencies began to lower the country’s sovereign ratings to speculative grade. “The downgrade of Brazil reflects a deeper economic downturn than previously expected, the continuation of adverse financial trends and increasing political uncertainty”, – noted, for example, the report of Fitch.

Theoretically Brazil could refuse to host the Olympics in the same event in relatively recent history the world’s biggest sporting events were, and also in Latin America. The world Cup of 1986 was originally planned to carry out in Colombia, but the government of this country recognized that it is not ready to take the championship, and in the end it took place in Mexico.

Such a scenario loomed before Brazil two years ago, when the Commission of the International Olympic Committee found that the level of readiness of objects for the upcoming games is only 10%. However, considerations of prestige were for the government above all else, in addition, the current Olympic games – the first held in Latin America. Construction “pile” turned into a predictable high inefficiency costs: if initially they were planned in the amount of $ 4.5 billion, including 2.3 billion on sports facilities), then in the beginning of this year, the estimate has exceeded 10 billion and continued to grow.

The reverse side of Keynesianism

“The bandits just a few days has made more than fifty attacks on public transport and government offices”

A logical continuation of the economic crisis was the political instability, which international experts warned in the middle of last year. By the end of the opposition members of Parliament initiated impeachment proceedings against President Dilma Rousseff, who in may was suspended for 180 days a vote of the Federal Senate. August 4, just hours before the opening of the Olympics, a special Commission of the Senate on impeachment by 14 votes to five supported the full suspension Rousseff, and the final decision on this matter should make next week a plenary session of the upper house of Parliament.

Rousseff was first elected President in late 2010, when the economy showed strong growth. The global financial crisis of 2008-2009 walked around the Brazil side, and many experts then spoke on the recent Brazilian economic miracle. It was even alleged that Brazil were only 30 years to catch up to the standard of living of the USA, considering that from 1994 to 2010, the poverty rate in the country fell by more than two-thirds.

The main Creator of the Brazilian “miracle” was considered Luiz inácio Lula da Silva, leader of the workers ‘ Party, who served as President from 2003 to 2010. His coming to power at the time was another indication of the left turn in Latin America, which in the Brazilian version entails the active use of Keynesian mechanisms in economic policy. Sports mega-projects is fully consistent with this approach to stimulate the domestic market. It was during the presidency of Lula, Brazil has won the right first on football world Cup (2007) and then to the Olympics (2009).

The flip side of increasing the role of government in the economy are not only inefficient spending, but also corruption scandals. One of them was associated with the distribution of construction contracts the state-controlled oil company Petrobras was the reason for the impeachment of Rousseff, who from 2003 to 2010 he headed the Board of Directors of the company. As it turned out, this scheme could be implicated Lula da Silva, allegedly kickbacks for construction contracts went to Finance the election campaigns of the workers ‘ Party.

However, a parliamentary investigation into corruption at the top of the Executive power could not succeed if the incumbent could boast of a high support of the people. But, as shown by a survey of the Brazilian Institute of public opinion studies and statistics conducted at the end of last year commissioned by the National Confederation of industry (CNI), 82% of Brazilians believed the work of Dilma Rousseff unsatisfactory. And another recent study demonstrated NKP difficult situation in this chronically distressed area of the country as a high crime rate. It turned out that about 80% of respondents over the past year, experienced violence or witnessed crime, and one in nine claimed that the main reason for rampant crime is to punish criminals or too soft a punishment for them.

The latest evidence of systemic problems in this area was adopted a few days ago, acting President of Brazil Michel Temer, the decision to send troops to the state of Rio Grande do Norte in connection with the sharp increase in crime before the Olympics. This measure had to go after the bandits just a few days has made more than fifty attacks on public transport and government offices, which forced the state Governor to urgently appeal to the Federal authorities.

In connection with the difficult criminal situation in Brazil, the governments of several countries had sent a warning to its citizens intending to visit the Olympics. Rio de Janeiro has a high crime rate, including the number of pickpocketing and robberies, which can occur in any place and at any time. Furthermore, widespread credit card fraud and ATMs,” – said, in particular, the report of the US state Department.

This, of course, does not mean that the Rio Olympics will be a failure. But the Olympics will be held, and the problems in the economy and increased government debt will remain. Moreover, despite the actual coming to power of right-wing opposition, a clear plan to resolve the crisis proposed so far.

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