Just months before Olympics, Rio de Janeiro struggles with massive financial burden

Just a few months before the opening of the Olympic Games, there is a lot to worry about in Rio de Janeiro.

Brazil is facing its worst financial crisis in 100 years, and the state of Rio is one of the most severely hit. Thousands of public servants are striking; the state has pushed back the date it pays its employees to the tenth business day of each month; after seven years of improvement, violent crime began to rise again in 2015; and, in December, the government declared a state of emergency in Rio’s health department because there isn't enough money to cover basic expenses at public hospitals and health clinics.

Julio Bueno, the secretary in charge of the state’s finances, recently told reporters this was the worst crisis the state has faced since the 1930s. Then he took ten days off on the advice of his doctor. The economic crisis had been keeping him awake at night, Bueno said, aggravating his existing hypertension and running down his health generally.

He isn’t the only top state official to suffer from ill health in the middle of the crisis. Rio’s governor, Luiz Fernando Pezão, was diagnosed with cancer and has taken sick leave, leaving the state’s affairs in the hands of his 81-year-old deputy, Francisco Dornelles.

Last week, Dornelles spoke about the state’s worrying financial situation, telling reporters, “We've emptied out the state’s accounts – we are doing everything we can.”

Despite this, most analysts have been saying that there was no need for alarm – the Olympics would work out regardless of Rio’s mounting problems.

After all, Mauro Osório, an economist at the Federal University of Rio de Janeiro who has been observing the state’s finances for decades, pointed out to Fox News Latino, the city has never disappointed in any of the big events it has hosted, such as the 2014 World Cup.

“It’s like there is an informal pact when big events happen,” Osório said. “Drug dealers don’t invade rival favelas, the policing works. The city is much better than what is usually is.”

Then last Thursday, a newly-built elevated cycling path collapsed into the sea, killing at least two people.

“It’s unbelievable,” Osório admitted, “This might raise some questions”about other Olympic building projects.

Rio's mayor, Eduardo Paes, who was in Greece for the Olympic torch lighting ceremony, flew straight back to Rio because of the bike path. He said the incident was “unforgivable,” and promised an investigation into the fatal tragedy.

The state’s finances won’t be an easy problem to solve. The state of Rio is dependent on revenue from oil exploration royalties, and its deficit skyrocket to $5 billion after oil prices plunged from $110 a barrel in June 2014 to the current $40.

There are also doubts about whether a new subway line that connecting the beach neighborhoods of the city’s South Zone to Barra da Tijuca, where many Olympic events will take place, will be finished on time. The state government has guaranteed that the new line will be operational by Aug. 5, when the Olympics start, but the original plan has already been altered with one station not opening until 2018.

Earlier this month, the state also announced that it would take out a loan of a billion reals – about $300 million – to complete the subway line in time, enraging public servants and pension holders who at the time were waiting for their paychecks to arrive.

“The government got a 1 billion real loan to finish the subway, but it doesn’t pay public servants on time. Do they want us to throw a party? Cariocas are affectionate, but there is no mood for a party,” Maria Beatriz Lugão, a 53 year old arts teacher who is on strike, told FNL.

She complains that the Olympics were about big contracts for construction companies rather than making the city better for its people. During the last two years, a major corruption investigation has led to the arrest of many executives from some of Brazil's largest construction companies, several of which were also responsible for Olympic projects.

“Here, big events come with big corruption scandals,” Lugão said.

The economics professor Osório wonders if, in the end, the Olympics were a good idea. “Maybe it would have been better not to have done it. It ended up costing too much money,” he said.

“Of course the city received a lot of investment, which was a benefit. But I think so far it hasn't led to the gains we expected.”