Submitted by Alicia Chavy via Global Risk Insights,
The Olympic Games are scheduled to begin on August 5. But will Rio de Janeiro be prepared amidst an economic recession, a looming public health crisis, delayed infrastructure developments, increasing crime rates, and numerous other problems that have rapidly developed over the past three years?
Zika: a looming threat to tourism and health standards in Brazil
The Zika virus made its way into the spotlight lately with a sudden and explosive growth of micro-encephalitis in newborns across Latin America. As a result of Brazil’s climate, inadequate public health system, and poor system for sanitation and water supplies, the virus found an ideal location to develop rapidly. While Zika has a devastating effect on pregnant women, especially in the low-income population, this issue has also brought to light other prevalent concerns regarding the Olympics this summer.
Zika looms over the Brazilian population and future tourists traveling from the around the world to watch the Olympic Games. The government’s response has been slow and inadequate; the Brazilian healthcare system has been heavily underfunded in recent years, with many poor areas in Rio de Janeiro lacking even basic infrastructure. In January 2016, hospitals ran out of money to pay for drugs, equipment, and salaries. Some patients died after they were not allowed into underfunded public hospitals.
Brazilian officials expressed concerns over the possibility of visitors staying away from Rio de Janeiro out of fear of contracting Zika. The city has taken precautions to ensure that tourists and athletes of the Olympics do not feel threatened, and officials have announced that venues would be inspected on a daily basis four months in advance, aimed at eliminating any stagnant water that could serve as breeding grounds for mosquitoes.
These efforts have not been able to eliminate global concerns over the issue. With the World Health Organization declaring it a global health emergency, Brazil has already been criticized for downplaying the risks of contracting the virus at the Olympics and the ongoing Carnival celebrations, which attract 1.5 million tourists a year.
Bribery and political corruption: the Brazilian way of business
Recently, allegations of bribery against the Brazilian speaker of the lower house, Eduardo Cunha, and five construction companies involved in Olympics projects have emerged. Brazil’s attorney general, Rodrigo Janot, claimed that some construction companies, already under investigation for their ties to the Petrobras scandal, paid bribes totaling USD 475,000 to Eduardo Cunha to help secure contracts for the building of venues and other works for Olympics.
These allegations are another example of the large impact the Petrobras scandal has had on Brazilian politics and the economy. Companies involved in Olympics construction projects found themselves blocked from receiving bank loans and credit lines during the ongoing Petrobras investigation, forcing Rio de Janeiro’s city government to act as a bank and lend companies money to prevent an inevitable slowdown in construction. Despite their efforts, projects for the Olympics have already been delayed and sometimes halted, including essential repairs on sewers in Rio de Janeiro.
However, Olympic officials have denied any delays and vow that the games will be free of corruption, serving as an example of how business in Brazil can be done “above the board”.
Social unrest and security issues
On November 16, three days after the Paris attack, a leading French recruit for ISIS tweeted “Brazil, you are next”. Attacks by Islamist gunmen in Egypt, Mali, Paris and elsewhere in 2015 has raised the alarm for big international events like the Olympics. Brazilian security agencies have trained over 85,000 security personnel, 47,000 police officers, and 38,000 soldiers to guard the 10,500 athletes and thousands of tourists attending the 2016 Games.
However, the security forces will need to focus on more than terrorist threats for the Olympics. Violent political demonstrations, increased levels of robberies and shootings, and a growing amount of areas that are considered dangerous have worsened the already poor security situation in the city.
A looming recession
Amid a deteriorating fiscal situation, the once proud member of the BRICS has gotten used to its degrading economic status. Olympics organizers have tried to cut at least USD 500 million from the USD 1.9 billion operating budget for the Games, and already laid off temporary workers. Despite their efforts, the cost recently increased with an additional USD 100 million for electricity generation, with the final budget totalling USD 9.8 billion.
Brazil might be heading towards one of the deepest recessions since 1931. The currency plunged 33% in 2015, state security forces face a budget cut of 25%, inflation has risen to at least 10%, and unemployment has been hovering around 9%.
Brazil has also faced challenges in improving its public transportation system, particularly in the critical subway extension project. If it cannot be completed on time, Rio de Janeiro will face huge traffic jams along its mountainous coastal roads and potential empty seats in the new Olympic venues. Additionally, critical levels of water pollution and delayed infrastructure project led city officials to admit that they failed to improve sewage system in lake areas and the Copacabana coastline by 80%, a promise that was made in their Olympics bid in 2009.
Even if Brazil is able to host the Olympics with all venues prepared on time, there will be bumps in the road. The combined challenges make it very difficult to believe in a positive Olympic experience for Brazil. The legacy has the potential to do serious economic and social damage, requiring a brutal prioritization and fiscal austerity from the government afterwards.
Rio de Janeiro city officials’ promise of showing how business can be done in Brazil “above board” is becoming more of an illusion than a reality.
via Zero Hedge http://ift.tt/1PXjd0g Tyler Durden