The state government of Rio de Janeiro has announced a “state of public calamity” over its financial crisis with less than 50 days until the capital city hosts the Olympics.

A decree published late on Friday said that a fall in public revenue – mainly a result of the oil crash – could stop the government from “honouring its commitments” to host the Rio 2016 Games with just 49 days until the Opening Ceremony. It also warned the crisis could cause a “total collapse in public security, health, education, mobility and environmental management”.

Even though RIO DE JANEIRO does not look like a disaster zone.

The calamity is financial, not natural. Brazil’s recession has caused tax receipts to plummet. Falling oil prices have pulled down royalties, which provided more than a tenth of Rio’s revenues. The budget deficit this year is expected to exceed 19 billion reais ($5.6 billion), a third of revenue.

Since 2010 regional debts, owed mainly to the federal government, have ballooned by a third in real terms, reaching 11% of GDP. Michel Temer, who is serving as Brazil’s interim president while Dilma Rousseff undergoes an impeachment trial, thinks something good can come of the crisis. On June 20th he reached a deal to restructure states’ debts. In return, they agreed to apply a proposed constitutional spending cap to their own budgets. This will reduce Rio’s shortfall this year by 5 billion reais.

The declaration of a calamity allows Mr Temer to give the state a further 2.9 billion reais for security, which will release money to complete the metro line. That may spare Rio Olympic embarrassment, but it still leaves a huge hole in the budget. “What happens after the Olympics?” wonders a cleaner at the morgue, who returned to work in mid-June, when payments to her firm resumed. Mr Dornelles is no doubt asking himself the same question.


Petros Stathis