Tuesday, April 5, 2016

Disastrous Ticket Sales, Ongoing Political Turmoil Put Brazil Olympics In Jeopardy

Tyler Durden's picture

Brazil's widely documented (and escalating) economic, financial, and political devastation has traversed a path from the tragic, to the farcical, to the absurd, and now appears stuck in surreal.
Because in addition to an imminent collapse of the Rouseff regime which will hopefully be peaceful while unleashing a period of a great unknown, in our last piece on the 2016 Summer Olympics we quite bluntly said that the thought of even hosting the games, in what is now only four months away, was a joke. Brazil’s economy is seeing depression like conditions, and political landscape is an absolute disaster.
To refresh your memory on the current state of Brazil, in the aftermath of China's hard commodity landing, the country has sadly devolved to sub-banana status level. Last summer, the country descended into political turmoil and the economy sank into what might as well be a depression. Nine months later, inflation is running in the double digits, output is in freefall, and unemployment is soaring. Last Wednesday, the government reported its widest primary budget deficit in history and less than 24 hours later, the central bank delivered a dire outlook for growth and inflation.
Meanwhile, VP Michel Temer’s PMDB has split with Dilma Rousseff’s governing coalition, paving the way for her impeachment and casting considerable doubt on the future of the President’s cabinet.
Just last week, in the aftermath of all of... this,  we asked a few very serious questions that we believe have yet to be addressed, along with a quote from the acting governor of Rio de Janeiro saying that the situation is “the worst I’ve seen in my career”
After all, there are quite a few very serious questions swirling around the Rio games. For instance: Will the water be clean enough for athletes to compete in? Will there be enough auxiliary power to keep the lights on? And, most importantly, will the games take place at all?
Millions of Brazilian citizens have recently taken to the streets to call for Rousseff’s ouster and to protest the return of former President Luiz Inacio Lula da Silva to government. It’s exceedingly possible that if House Speaker Eduardo Cunha can’t manage to get the impeachment job done, the populace will simply march on the Presidential palace.
How any of the above is compatible with hosting the largest sporting event in the history of the world is beyond us and George Hilton apparently has reservations himself. As does Francisco Dornelles, acting governor of Rio de Janeiro. "This is the worst situation I've seen in my political career," Dornelles said this week, referencing the state's finances. "I've never seen anything like it."
Now, less than a week later, there is more disturbing, if expected, news. As CNN reports, only half of the tickets have been sold. With just four months to go, this is a huge blow to the viability of the 2016 games.
Brazil’s new minister of sports Ricardo Leyser (replacing another guy who resigned just days ago) suggests that the Brazilian Government may buy the tickets and distribute them to public schools. But... with what funds? After all Brazil is fast approaching insolvent? Or is this the asset the Brazilian Central Bank will monetize in its version of QE, as it prints even more money, in the process unleashing the worst stagflationary episode in history?
Actually, this is not a joke: Leyser told Brazilian newspaper Folha that the Brazilian government may purchase tickets that will be distributed to public schools. He said public officials must also work to boost worldwide confidence in Rio's ability to host the games and ensure travelers' safety.
The Government already posted a record primary budget deficit, and as a reminder, construction workers who are building the venues for the games are already pissed off that they aren’t being paid for their work. It's unclear whether construction of the Olympic facilities will be finished as organizers have faced steep funding constraints - the budget was slashed by $500 million in January.
For now, however, just like with the stock market, there still is hope.


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