The Brazilian federal government has frozen Rio de Janeiro’s accounts after the state failed to pay a $53 million debt owed to the federal administration. This essentially means that the state cannot use its own bank accounts until the debts, contracted between March and June, are paid off.
According to Rio’s state officials, the measure doesn’t affect the state immediately; it will impact 2017’s budget instead.
This is only the latest chapter of a long financial struggle haunting Rio’s state government. A few weeks prior to the Olympics, the state declared “public calamity” in response to its financial disaster. With the maneuver, Rio received a $840,000 loan from the federal government, which was used to pay for the construction of a subway line.
Rio’s Governor Luiz Fernando Pezão will go to Brasília to negotiate a way out of the mess with federal officials. He has accused the federal administration of not paying its share of the costs for the Olympics. According to Pezão, Rio is due $340 million – and has essentially blamed Brasília for the collapse experienced by his state.
Such a disastrous situation is the result of years of irresponsibility with public administration. Over the last few years, the government of Rio de Janeiro has embarked on ambitious projects, including the reconstruction of the Maracanã Stadium for the 2014 World Cup. It also waived $58 billion in tax exemptions for different industry sectors between 2007 and 2015.
Pezão has now proposed an austerity package, which includes reducing the wages of public servants by up to 30 percent. “Otherwise,” claims the governor, “our deficit will hit $16 billion.” Predictably, the package has ignited protests. Rio’s state House of Representatives was invaded by police officers, fire-fighters, and other civil servants demanding the governor’s impeachment.