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Editorial, by Stone Korshak

RIO DE JANEIRO, BRAZIL – It is amazing to be so close to the Olympics after all these years of build-up, only to have the last year be such a let-down. The mood before the 2014 World Cup was much different, there were concerns about public spending and potential mass-protests, but those were the good times – before a crippling economic recession, all-ensnaring corruption scandal, political upheaval with a presidential impeachment, and a zika scare.

Stone Korshak, Editor and Publisher of The Rio Times.
Stone Korshak, Editor and Publisher of The Rio Times.

Here is how it feels ‘on the ground’ today, we’ll go reverse order. The zika virus is scary, but really pretty unknown in terms of connection to birth defects, and it is not just in Brazil. The good news is, it is ‘winter’ in Rio so mosquitoes aren’t a major concern. Also, for better or worse, statistically I’ve read that someone has a better chance of being shot in Rio than getting zika.

Next, is the political upheaval, and the impeachment of President Dilma Rousseff and ousting of the PT (Workers’ Party). This is very controversial as many countries are seeing highly polarized populations. From the Trump run in the U.S. to the Brexit in the UK, moderate socialism is being confronted by unadulterated capitalism (at all costs).

Will Rousseff fight off the impeachment? Not likely. Will the new government backslide on all the social programs helping lift the majority of Brazilians out of extreme poverty and pocket the nations proceeds into their ‘old-money’ bank accounts? Very likely. That’s democracy in action for us in modern times.

Next topic, related to the above, is the Lava Jato (Carwash) corruption scandal, and where will it end. As Rousseff argued, her impeachment very well may have been an effort to shut the investigation down, and there were plenty of recorded phone calls that confirm it. Even though the Lava Jato seems to be party agnostic, there were enough of the political elite in the cross-hairs to form an alliance against it.

The case is still moving along, but seems to occupy less of the news headlines and I don’t think anyone will be surprised if it quietly fades into the past with minimal heads rolling. But, the Mensalão case did send some people to prison, and there does seem to be an appetite in this young democracy to see the corruption curbed… we’ll see.

As far as the economic recession, the halving of oil prices, added to the general “Brazil Cost,” has driven most foreign business out and the GDP and national deficit and unemployment rates are all in grim shape. Yet life continues, and local businesses are surviving despite there being more shuttered store windows and ‘for rent’ signs. Luckily for those looking to live here, real estate prices have also been falling slowly, returning back to reality.

Without a doubt, Rio’s financial crisis is making for difficult times, and Governor Francisco Dornelles declared a financial emergency – stating that without federal aid Rio would not be able to meet its obligations during the Olympic and Paralympic events. Schools, hospitals and police are among the government jobs that cannot be paid without a federal bailout, which has been granted.

So all-in-all, with 25 days left until the Olympics, there may be some issues with polluted waters, and maybe some transportation disappointments (the Barra Metro subway extension opening in time is dubious at best), but Rio will host an amazing event. As far as the rest of life in Rio, if one changes their expectations, the forecast looks pretty good for winter (for the next five days at least).

The forecast in Rio de Janeiro
The current five-day forecast in Rio de Janeiro looks pretty good, 30 degrees Celsius is 86 Fahrenheit, internet image recreation.
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3 COMMENTS

  1. Dear Stone,
    While Brazil’s short-term economic situation is indeed dire, I am optimistic for its medium and long term prospects, especially if, as appears likely, Dilma is impeached.
    The PT and its main partner in crime, the PMDB, have run Brazil’s public enterprises and banks as if they belonged to the parties, rather to the public at large. This was brought out very clearly in the “Lava Jato” or Carwash investigations. Contrary to the impression given in your editorial, the politicians being investigated in these operations are overwhelming from PT or PMDB, especially where larger bribes and illegal campaign contributions are concerned. To Dilma’s credit, she didn’t try to derail the Lava Jato investigations, except for her offer to Lula to be her Chief of Staff, so that he could only be tried by the Supreme Court, where trials typically fizzle out because they run out their statute of limitations due to the large number of cases before the court and delaying tactics used by the legal defense teams.
    I also take issue with your assertions that the new government reflects unadulterated capitalism or that it will very likely backtrack on the social programs. There is little evidence for that. One of Temer’s early actions was to increase the budget allocated to the main social assistance program, the Bolsa Familia, from the 9.5 percent planned by Dilma, to close to 12 percent. The PT’s and Dilma’s mismanagement of the economy resulting in high unemployment and inflation is by far the greater threat to a reduction in poverty.
    The new government is much more likely to cut back on the number of political appointments and curtail the growth of the civil service and expenditures associated with them. The reduction in the number of ministries that had mushroomed under the PT administrations is a welcome start. The new government is also much likelier to privatize public companies, such as the scandal-plagued Transpetro, and offer long-term private concessions in infrastructure, especially airports and ports. Not only will this raise much needed revenue, reducing or obviating the need to raise taxes, it is much more likely to increase the quality and efficiency of the services, lowering the cost of doing business. At the same time it makes it much more difficult for politicians to raid the companies for their personal or party gains. Moreover, if, as appears likely, the government allows majority foreign ownership of the entities being privatized, the chances of investor collusion and government corruption will fall further. Even without majority foreign ownership, I strongly suspect that the recent prosecutions and prison sentences over investor collusion in government construction contracts has already decreased the likelihood of similar behavior in the future.
    I am also much more sanguine about seeing heads continue to roll in the Lava Jato and other criminal investigations. My impression is that the Lava Jato investigation has resulted in more people being put in jail (even if some have yet to been convicted) than were put under the Mensalão investigation under Lula’s administration. Seeing politicians and top businessmen, including billionaires, in jail, coupled with a stellar economic team, is what makes me optimistic about Brazil’s long-term future.
    Mateen

  2. Who are you guys kidding? This is a train wreck! The first ever Olympics in South America, and the venues are not completed, the water that was promised to taken care of is still full of raw sewage and now even “superbugs”, dead bodies washing up on the shorelines, people being killed during muggings, and you think it will be “OK”?? What world are you living in? I am only hopeful that there are not killings of competitors or tourists who are willing to go into a war zone to see some countries compete side by side. This will be probably be the first and last Olympics ever held in South America.

  3. Mark,
    You are clearly correct. The other gentlemen’s comment makes one thing he’s on Mars, not Brazil.

    Brazil never ceases to amaze me. Last week our 2013 Kia Cerato was in for service and I paid R$1800 for a 70,000 km service. Something I imagine would cost $200 in the States. When we picked up the car we were told it would need 4 new brake discs. We asked for a quote with parts listed. Just the parts, with the Custo Brasil, came to USD $1717. At home, since I had a trip to LA planned, I immediately checked the internet price in the Real world. Same parts from a Kia dealer USD $280.

    How in the world can a country function like this? Absolutely amazing.

    I’ve ordered the parts and they’ll be in my bag upon my return to Rio next week.

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