This article was published by The McAlvany Intelligence Advisor on Monday, June 20, 2016:
A postmortem on Rio 2016 is likely to show a loss. History might record a cataclysmic disaster. Seven years ago when the IOC awarded the 2016 summer Olympics to Brazil, the main concern was crime in the city of Rio de Janeiro. At the time IOC spokesman Mark Adams told the AP: “We have confidence in [Brazil's] capacity to deliver a safe Games in seven years. Security is of course a very important aspect of any Olympic Games….”
At the time Rio was one of the top ten most crime-ridden cities in the world. But everything else seemed to bode well: oil prices were high, the socialist government was spending on infrastructure like there was no tomorrow, the nation had been named one of the four nations of the world on track to out-produce the western economies by 2025: the BRIC nations of Brazil, Russia, India and China. The country's population was growing, pushing towards 200 million. Its GDP placed it easily in the top ten.
What could go wrong?
Seven years is a long time. Especially when a country is embalmed with the toxic substance of totalitarianism. When oil prices began to drop, government spending increased, following the Keynesian dictum of “when private demand falls, government demand should increase.” BRIC is now history and Brazil has had the credit rating on its massive debt cut repeatedly.
Operation Car Wash has sent numerous politicians and Petrobras executives to jail, and has forced the temporary (possibly permanent) resignation of its president for cooking the books to help her get reelected in 2012. She has been replaced by an interim crook who is also being investigated. The economy shrank nearly four percent last year, and is likely to crater further this year. Inflation is running double digits, as is unemployment.
Add to that the fact that Rio is the epicenter for the Zika virus, and the massive public works project called Rio 2016 could turn out to be a historic disaster.
The Games begin on August 5th and continue through the 21st, followed by the Paralympics in September. 10,500 athletes are expected to compete at 38 different venues in 28 different sports, including for the first time golf and rugby sevens. Some 500,000 people are expected to attend the games, putting, according to the PR people, Brazil back on the map and showing the world that all is well. It's the classic lipstick on a pig move.
Those athletes are already being robbed in broad daylight. Three members of the Spanish Olympic team were accosted on May 21 by five young thugs, two of them brandishing guns. Other athletes are tweeting home telling their families and friends to stay home.
And now the city and the state of Rio de Janeiro have run out of money. They've already cut back on police and other services by an estimated 30 percent, and their paychecks, along with doctors and teachers, have been delayed. Following Wednesday's downgrade by Fitch from B+ to B-, the governor of the state of Rio issued a “financial emergency” statement:
This crisis is preventing the state of Rio de Janeiro from honoring its commitments to the Olympic and Paralympic Games. [It is] causing severe difficulties in the provision of essential public health services and can even cause a total breakdown in public security, health, education, mobility and environmental management….
I want all the people of Rio de Janeiro to understand that the state is experiencing a major financial crisis. There was a problem in the oil sector, there was a problem in economic recession, with our steel industry, with our automotive sector.
We lost a large collection from the [tax on circulation of goods and services], we lost a lot of royalties from oil, and this public emergency measure has aimed to draw attention of every citizen to the financial difficulties [being] experienced by the state.
What the governor didn't mention was anything about the corruption being revealed by Operation Car Wash, the planned socialist experiment that is failing along with the money printing “stimulus,” or the massive debts that will never be repaid.
When two University of Michigan professors did a postmortem on the Sochi Olympics in 2014, it found that Russia spent $50 billion, with precious little return expected on it. That was nearly four times the amount that Great Britain spent on its summer Olympics in 2012, which was double the amount estimated. The ultimate cost fell on the taxpayer, with every man, woman, and child on the island being forced to ante up $315 apiece. Said the professors:
There is a high cost associated with these mega events, but you also have to ask what you get for your money. If this is money that improves the city, provides a legacy in the long term, then it might be a good investment by the city even though the cost is high.
But the key question is, how will it make [the] city a better place to live in the future? And you could also ask yourself, what other uses could there be for that money?
For one thing Brazil could have used that money to pay the interest it owed to international bankers who happily loaned them all they could stand when times were good. Or they could have used the money as a rebate to the lowly taxpayers already suffering under socialist controls, massive unemployment, and double digit inflation.
What Brazil should have done, of course, was to have opted out of the Olympics lottery back in 2009. They knew that most Games suffer from the “Olympic Curse” suffered by Beijing and Athens, which ended up having unused facilities rot away from disuse just years after the events ended.
The plea from Rio's governor was answered by the national government, which issued a “special imbursement” of $900 million to cover the costs for security and completing the metro system to handle the expected crowds. But nothing to clean up the Guanabara Bay where yachting events are scheduled to take place. Olympians lucky enough to have dodged thugs and Islamic terrorists (who have already warned they plan attacks on the games) will find themselves having to dodge plastic bags, human excrement, soiled diapers, and other flotsam.
Brazilians themselves will be unable to dodge the inevitable bill when it comes due. It could come in the form of a police state, according to Jean Wyllys, Rio's federal security deputy:
Social movements and civil society organizations will engage in acts of civil disobedience, street protests, and the government will probably use its repressive forces against the population.
The Rio 2016 pig cannot be hidden behind its lipstick any longer.
Yahoo.com: Rio state declares financial emergency, requests funding for Olympics
The Guardian: Rio de Janeiro governor declares state of financial emergency ahead of Olympics
Breitbart.com: Rio Declares Fiscal Emergency: Olympics May Cause ‘Total Breakdown in Public Security'
Fortune.com: Brazil Plans Emergency Funds for Rio Ahead of Olympics
Background on the Rio Olympics
The costs of hosting the Olympic Games
The costs to Britain's taxpayers of hosting the 2012 Olympics
BusinessInsider.com: Why Sochi Is By Far The Most Expensive Olympics Ever
Crime rate comparison between Rio and Chicago