Rio de Janeiro’s finances ‘tragic’ in lead-up to Summer Olympics

RIO DE JANEIRO—In an ominous sign ahead of the Summer Olympics, Rio de Janeiro’s acting governor said March 30 that the state’s finances are “tragic” and suggested selling off property to shore up barren coffers.

Francisco Dornelles, a former senator with a long career in public service, said he had “never seen anything like it.”

“This is the worst situation I’ve seen in my political career,” said Dornelles, standing in for Rio Gov. Luiz Fernando Pezao, who is on leave for cancer treatment.

Dornelles, 81, spoke during an interview Wednesday with the newspaper O Globo. When reached by The Associated Press, a spokesman at his office confirmed the interview but said Dornelles would have no further comment.

The city of Rio de Janeiro, which is part of the state by the same name, is hosting the Aug. 5-21 Olympics, and in the past several months Olympics organizers have announced many cuts, including to personnel at major Olympic venues.

News reports have suggested the financial crisis might derail promises to unveil a state-funded subway extension in time for the Olympics, though local authorities have insisted they are on track.

Dornelles didn’t provide numbers, but he said plunging tax income is behind the state’s financial crisis.

Much of Rio’s tax income comes from the Petrobras oil company, which is embroiled in a big corruption probe that has snared several top politicians and businessmen. Last week, Petrobras reported a record quarterly loss of $10.2 billion due to a large reduction in the value of some assets amid lower oil prices.

Dornelles said that it would take a “large effort” for the state to meet all its obligations and that it was looking for credit and other measures to add to diminishing revenues. He suggested that selling state property was one option.

Brazil is suffering its worth recession in decades. Latin America’s largest economy is expected to contract 3.6 per cent in 2016 after a similarly bad year in 2015.

Meanwhile, President Dilma Rousseff is facing impeachment proceedings in Congress that have all but eliminated her ability to push through legislation that might alleviate the dire fiscal straits of Brazilian states.

Brazil is also at the centre of an outbreak of the Zika virus, which researchers think is linked to a rise in newborns with a rare birth defect.