Proponents of the efforts to impeach Brazilian President Dilma Rousseff argue with government supporters.Eraldo Peres/The Associated Press
The Olympic Games have had more than a passing acquaintance with corruption scandals related to their ridiculous costs and the white-elephant structures left in their wake. Most of the financial fiascos surface only after the athletes have packed up their gear and the Grand Pooh-bahs have departed from their free luxury hotel suites.
Leave it to Brazil to blaze its own trail.
The worst public swindle in the country's long history of shady dealings among leading political and business figures has ensnared senior political operatives, the state-controlled oil giant Petrobras and major construction and engineering companies, and threatens to drive embattled President Dilma Rousseff from office.
But for some reason, the vast projects linked to the infrastructure and facilities needed for the 2016 Olympics in Rio de Janeiro had been largely left alone by the bribery investigation dubbed Operation Car Wash. Now, though, slightly more than four months before the Games, a Brazilian federal court has reportedly frozen payments earmarked for a consortium constructing the Deodoro complex that will house 11 sports in nine venues. Two of them – for shooting and equestrian events – remain unfinished.
Brazilian state bank Caixa Economica Federal confirmed that it has suspended the funds, which leading Brazilian news site G1 pegs at 128.5-million reais ($46-million). The total cost of the complex is 800-million reais.
The consortium members were already caught up in the deepening probe of their Petrobras-related dealings, in which companies allegedly obtained overpriced public contracts through close to $3-billion (U.S.) in bribes, part of which flowed to political coffers. So it's no surprise that investigators would closely examine their Olympic-related activities.
Still, it's another body blow to Ms. Rousseff, increasing the chances that she will soon be impeached, especially now that her main partner, the Brazilian Democratic Movement party, has abandoned her governing coalition. Yet it's not the Scandal of the Century that will seal her fate. It's her dismal economic and fiscal management, which has left Brazil in its worst shape since the Great Depression.
In fact, the once-vibrant economy is forecast to contract 3.6 per cent in this Olympic year, following a decline of 3.8 per cent in 2015, the worst two-year record in more than a century. And economists have trimmed their forecasts for 2017 to minimal growth of 0.3 per cent. Despite the economic stumbles, inflation is expected to remain an uncomfortable 7.3 per cent.
All of this has taken a steep toll on government finances, driving the primary budget deficit to a record-high level. Ms. Rousseff's rock-bottom popularity leaves her in no position to deliver the tough medicine needed to fix any of this. The markets are so thrilled at the prospect of her imminent political demise – and the hope that the central bank will regain the muscle needed to tackle inflation – that equities have posted their strongest monthly gain in 16 years and the currency has been the second-best performer in the emerging world this month. But the euphoria won't last, once traders take a sober look at the fiscal and economic situation.
Talking about the currency, Société Générale analysts have concluded that its prospects remain gloomy, "given the expected deepening of stagflation in 2016, [the] high fiscal deficit, rising public and corporate debt burden, difficult global growth environment … and a subdued year for commodities."
Brazilians are already exhausted, and the Olympic Games won't prove much of an elixir.