In late July we said [3] Brazil was sliding into a depression.
We based that assessment, in part anyway, on the following graphic from Goldman:
It would only take the bank four months to agree with our summary of their own analysis (Alberto Ramos called it [5] a “depression” on Tuesday after a decidedly abysmal GDP print).
Accompanying our depression call was the following assessment of Brazil’s preparations for the upcoming Olympic games in Rio:
The Brazilian economy hit its metaphorical, and literal, bottom earlier today when AP reported that, with the Brazil Olympics of 2016 just about 1 year away,"athletes in next year's Summer Olympics here will be swimming and boating in waters so contaminated with human feces that they risk becoming violently ill and unable to compete in the games."
In other words, competitors in Brazil's olympic games will be swimming in shit.
Brazil was, and still is, literally up shit creek without a paddle.
Well as you might have surmised based on the release of a series of economic data so bad that analysts are having trouble coming up with new ways to describe the situation, the outlook for next year’s summer games hasn’t improved. In fact, things have worsened materially to the point that now, athletes will be asked to pay for their own air conditioning.
As Bloomberg reports [6], “following a new round of cost-cutting by the Rio 2016 organizers, athletes will be asked to pay for the air conditioning in their dorm rooms, stadium backdrops will be stripped to their bare essentials, and fancy cars and gourmet food for VIPs are out.”
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In short, organizers can no longer depend on the government (and who knows what the government will look like by the time the games commence) to fund cost overruns. That means spending only as much as Brazil expects to take in from sponsorships, ticket sales, and a grant from the International Olympic Committee.
Apparently, the games were already some $520 million over budget. The government was supposed to cover that (and more) but obviously that’s out of the question given Brazil’s worsening fiscal crisis. “By the time the Games begin, the committee plans to have 500 fewer paid staff than the 5,000 it originally expected,” Bloomberg notes, adding that “the deepest cuts will probably come from operational areas like catering, transportation and cleaning services.”
As for the athletes, well obviously they’re a bit concerned.
“The world wants to tune in and watch the world’s greatest athletes compete at the absolute highest level," Nick Symmonds, a two-time Olympic runner said. "If you don’t provide them with good food, a good place to sleep and comfortable temperature, they won’t be able to recover and bring the A-plus product that the world is demanding. To cut the budget on athletes’ hospitality and comfort, that’s just going to cheapen the games.”
Brazil has also abandoned a plan to put TVs in Olympic Village rooms.
Meanwhile, there was no respite on Thursday from still more abysmal economic data. Industrial production contracted by 0.7% M/M in October (-11.2% Y/Y). That's the fifth consecutive monthly decline. "The industrial sector (which has been reducing headcount at an increasingly fast pace) contracted 0.9% in 2014 and is expected to contract at a much higher rate in 2015 as it continues to face strong headwinds from high levels of inventories, record low confidence indicators, a high and rising tax burden, rising energy costs, and weak external demand (particularly from Argentina for durable goods)," Goldman writes.

Oh, and for anyone still holding out hope that the central bank might throw caution to the wind - pass through inflation be damned - and cut to save the economy, well, you probably shouldn't read the Copom minutes. Here's one passage from Goldman that pretty much sums it up: "Specifically, the Copom is now committed to adopt the necessary measures to keep inflation under the 6.50% upper limit of the inflation target band by end-2016, and to make inflation converge to the 4.50% target in 2017. Hence, based purely on a strict interpretation of the new guidance, the probability of a rate hike at the January meeting rose significantly."
There is, however, a silver lining. Rich NBA players will not be affected by the Olympic cutbacks (via Bloomberg):
Others worry that the cuts will further underscore the chasm between athletes from wealthy countries and those from poorer ones. (Already some top athletes, including the NBA players who join the USA Basketball squad, choose luxury hotels over accommodations in the Olympic Village.) Those who can afford extra for air conditioning or who travel with laptops or iPads will have it; others may not.
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