Brazil is set to host the Summer Olympics and the Paralympic Games in less than 100 days. But analysts are questioning whether the country will emerge any better economically after the closing ceremony brings the games to an end.
The latest figures by national statistics agency IBGE indicate that Brazil scored worse than almost any other major economy in 2015, with its GDP contracting by 3.8%, the country’s worst set of figures since 1990.
Economic growth in the world's seventh-largest economy has fallen sharply in recent months and is quite different from seven years ago when Rio was awarded the world's biggest sporting event. In 2009, the nation's economy was emerging from a recession and analysts were optimistic about its potential growth. The Games were seen back then as a way of promoting the country’s new economic status but things haven’t quite turned out the way they expected.
Carlos Nuzman, the president of the Rio 2016 organizing committee, said that the economic issues have not affected the Games and that although some cuts have been made they were only to eliminate the "excess". Still, organizers of the Games, which run from August 5-21, have scaled back in a number of areas to balance their operating budget of £1.35bn, with cost-cutting measures of some $500m (£353m). Besides eliminating a 4,000-capacity floating stand at the Olympic rowing site on the Rodrigo de Freitas lagoon, they have not made changes to any of the playing fields.
Economic growth in the world's seventh-largest economy has fallen sharply in recent months and is quite different from seven years ago when Rio was awarded the world's biggest sporting event.
Ticket sales to the events have not been strong with only 12% and 15% of Paralympic tickets and 47% of Olympic tickets sold to date and out of the 6.6 million Olympic Games tickets available, just 3.1 million have been bought.
Nuzman doesn’t seem concerned. According to him, "Brazilians love to buy tickets at the last moment. This happened with the World Cup and other events. I am confident we will have full stands, and I hope sponsors can give the tickets they have to their guests."
He points to more than 700 commercial contracts with 1,272 suppliers and a sponsorship sales program that has reached 95% of its target, including Coca Cola, Nissan and Bradesco.
With all the hoopla of Rio2016, the reality is that Brazil is in a political crisis and a severe recession. Brazil's debt has also been downgraded to junk status and its president, Dilma Rousseff, could be impeached this year.
In comparison, Mexico, the second of the two largest Latin American economies, is growing, its politics are relatively stable and its debt was upgraded in 2014. To back up the difference between the two countries, officials in Brazil announced that unemployment hit nearly 11% in the three months ending in March, up from about 8% a year ago while Mexico's unemployment rate was 3.7%.
According to government figures released Friday, Mexico's economy grew 2.7% between January and March compared to a year ago, slightly better than expected, and a lot better than Brazil's economy which shrank 3.8% in the fourth quarter last year. Its central bank estimates the economy will contract another 3.5% this year.
Experts put part of the blame for Brazil’s situation on its dependence over the last few years on China which increased greatly since 2003 when Brazil's exports to China were worth about $4 billion. By 2013, that figured ballooned to $46 billion, according to IMF data and the slowdown in China will only increase the deteriorating Brazilian economy. Exports have declined over the last few years and President Rousseff has refused to tighten its belt and cut down public spending.
Aside from increased unemployment, the country suffers from a decrease in consumer confidence and an inflation rate that nearly doubled in the last month alone. Added to the mix is the latest bribery scandal at the state-run oil company, Petrobras, which involves many of the country's top business and political personalities.
Mexico, on the other hand, has announced that it would trim costs at the country's state-run oil company Pemex, and will offer additional oil fields to foreign, private investors.
With less than three months to go, Brazil is hoping that the Olympic and Paralympic Games will bring the nation a much needed boost in status and help put some extra reals into its coffers.