Big Bets on the Biggest Games – The 2016 Olympic Games in Rio de Janeiro are facing a major challenge due to the deepest economic recession that has hit Brazil since 1930. Inflation has soared, while GDP growth has contracted. In the midst of this situation, the poor are the ones who are hurting the most. Now the big question is: can the world’s biggest sporting event, held in August, help revive Brazil’s economy, at least to cover the losses?
Big Bets on the Biggest Games
oragoo – Ubira Santos, a 63-year-old sand sculptor, often uses Rio de Janeiro’s Copacabana beach as a place to work. His latest work, shown during an interview with The Guardian journalist in mid-July 2016, is a sculpture of a woman sunbathing under the statue of Christ the Redeemer—a famous icon that adorns the city.
With the Olympics approaching, Santos’ hopes are growing. Just 20 days before the big event, he hopes the event will boost sales of his sculptures. Although he only received a small fee from visitors who took pictures with his creations, it was considered enough.
However, Brazil’s slumping economic situation made Santos feel pessimistic about the government’s promises regarding the Olympics. “The situation in Brazil has been very difficult lately. I can only hope that the arrival of tourists can improve the situation,” he complained.
For Santos and around 22.03 percent of Rio’s population who are still considered poor, the Olympics should be a new hope. Data from the IBGE (Instituto Brasileiro de Geografia e Estatistica) shows that Brazil is experiencing its worst economic crisis in the last 25 years. The Huffington Post even called this recession the worst in Brazil’s history since the country was founded 100 years ago.
Overview of the Brazilian Recession
In the last decade, Brazil’s GDP growth has fluctuated significantly. World Bank data shows that in 2006, Brazil still recorded growth of 4 percent, increasing to 6.1 percent in 2007. However, after a 1 percent decline the following year, the growth rate surprisingly dropped to -0.10 percent in 2009.
After having jumped drastically to 7.5 percent, Brazil fell again. Growth fell from 3.9 percent in 2011 to 1.9 percent the following year, then rose again to 3 percent in 2013. However, one year later, the impact of the recession began to appear with GDP growth dropping to 0.10 percent. In 2015, this figure fell again to -3.8 percent.
In terms of inflation, Brazil also experienced a spike. Inflation, which initially hovered around 3.6 percent, slowly rose to 4.9 percent in 2009, then to 5.0 percent a year later, and finally hit 6.6 percent in 2011. Last year, inflation jumped even further to 9 percent.
The rising inflation has also been accompanied by a spike in unemployment. In early June 2016, CNN reported that the unemployment rate in Brazil, which has more than 200 million people, reached 11.2 percent between February and April, with approximately 11.4 million people unemployed—a 20 percent increase over the previous year.
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Corruption involving politicians and businessmen in Brazil has been one factor that has worsened the country’s economic situation. A corruption scandal at the state-owned oil company, Petrobras, involving high-ranking officials and Brazil’s political elite, has had serious repercussions, including massive job cuts. Within two years, Petrobras was forced to lay off 61 percent of its 276,000 employees. Similarly, Brazil’s largest construction company, Odebrecht, did the same.
As a result, many people are now roaming the streets or are forced to stay at home because they have lost their jobs. The ever-increasing inflation makes it increasingly difficult for them to meet their daily needs. The prices of goods have skyrocketed, while people’s purchasing power has plummeted. Santos and his group are the ones who have felt the most impact from this condition. Before the recession, his life was already on the brink of poverty, and when the recession hit, Santos, along with millions of poor people in Rio and throughout Brazil, were squeezed even harder.
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An Unfair Bet
Instead of dealing with the impact of the recession, the Brazilian government chose to turn a blind eye and a deaf ear, continually promising the public and the world that “Brazil is fine” and that the Olympics would go ahead. They argued that this sporting event would be the solution to overcoming the recession.
In mid-May, Bloomberg published an analysis by Barbara Mattos of Moody’s that “The Olympics are only a month long, and they won’t provide enough economic stimulus to offset the downturn Brazil is experiencing.”
Barbara acknowledged that some, such as car rentals, international airlines, and sports facility rentals, might benefit from the Games. However, those benefits would only be felt in the Rio metropolitan area, not in the favelas, or low-income neighborhoods. With the Games confined to a single city, the economic impact of the Games is unlikely to be felt evenly across the country.
This could widen the already wide gap between the upper and lower classes. As a result, crime rates and police violence have also spiked.