World Economy

Rio Declares Financial Calamity

Rio Declares Financial CalamityRio Declares Financial Calamity

Just weeks before it stages the 2016 Olympic Games, the state government of Rio de Janeiro has declared a “state of public calamity in financial administration” and warned that the situation is so dire it impedes the locale’s ability to meet Games commitments.

The Olympics start Aug. 5 with Brazil already facing an impeachment trial of suspended President Dilma Rousseff, a public health crisis over the Zika epidemic and a deepening recession, Yahoo reported.

In an official decree issued by acting governor Francisco Dornelles, the state government said the crisis could cause a “total collapse in public security, health, education, transport and environmental management.”

Mario Andrada, executive director of communication for Rio 2016, said the Games would not be affected.

“We knew since last year that the financial state of Rio state was critical. We work with them every single day. They have fulfilled all their obligations for the Games. They created a state law for tax breaks that we were able to use,” Andrada said.

The state of Rio has 16 million inhabitants and relies heavily on royalties from the oil fields off its coast. Hit by falling revenues and the tumbling price of oil, the state has inched further and further into the red while a huge corruption crisis has left state-run oil firm Petrobras, one of Rio’s biggest companies, reeling.

  Salaries Pending

Rio state government has been struggling to pay salaries and pensions, public hospitals have complained they lack basic supplies, and earlier this month, local media reported that the state-run morgue was forced to stop receiving bodies because subcontracted cleaning services were no longer being paid for.

The crisis has even affected the new metro line the state government is funding for the Olympics, which is now to be ready just days before the Games begin and will operate on a limited service.

On Friday morning, Rio state Finance Minister Julio Bueno said that if the state were a company, it would enter into judicial recovery. “I need the federal government to help me,” Bueno said, according to Brazilian news site G1, which reported a likely 2016 deficit of almost $6 billion for the state.

Bueno said that security was the state’s biggest cost. Police officers have been receiving salaries in arrears for months.

Andrada said Olympic security would not be compromised, as it is a federal government responsibility. “Most of the resources, funding, equipment and manpower comes from federal government,” he said.