RIO DE JANEIRO — Three months after its successful staging of the Summer Olympics, Brazil's cultural hub should be riding high. Instead it is a financial, political, crime-ridden mess.
Two former governors have been arrested, one accused of vote-buying, the other of running a vast corruption ring. Prosecutors are investigating billions of dollars in state tax exemptions that benefited luxury jewelers, construction companies and even brothels. And violent crime continues to surge, along with allegations of execution-style mass killings by overtaxed police.
Rather than the bright, post-Olympic future they were promised, many Cariocas — as Rio’s citizens are known — fear the city is doubling down on the chaos and corruption of its past.
“It’s in the worst condition in 20 years,” said Ignacio Cano, a professor of sociology at the State University of Rio de Janeiro. “You have an economic crisis, a political crisis, a moral crisis. There is a general perception of a very dark time.”
Financial problems are at the core of the state’s difficulties. In June, just weeks before the Olympics, officials declared a state of fiscal “public calamity.” Brazil’s federal government stepped in with an $870 million bailout, but that money has gone — and with it the Olympic cheer that briefly uplifted the city.
Rio’s governor, Luiz de Souza, has blamed the state’s money woes on a drop in oil-tax revenue because of the fall in petroleum prices and a slowdown at the state-run oil company, Petrobras. The company, which is headquartered in Rio, has been roiled by an enormous graft scandal.
Faced with a $5 billion deficit and a government that has more retired than active employees, de Souza, known as “Pezão,” or “Big Foot,” is pushing austerity measures that include cutting official spending and increasing employees’ pension contributions.
The employees say corruption and mismanagement caused the crisis, and they have been protesting vociferously outside Rio’s state parliament as it debates “the package of evils.”
Jerson Carneiro, a professor of administrative law and management at Rio’s Ibmec business school, blames the problems on the way Rio has always been run — a system he says is based on cozy ties among business leaders, politicians and government officials, rewarding corruption and breeding inefficiency.
“It’s crony capitalism,” Carneiro said. “If the state was a company, it would be in bankruptcy proceedings.”
To many, the embodiment of that system is former governor Sérgio Cabral. In 2012, photos were published showing him and other government officials, some wearing napkins on their heads, partying at the Ritz Hotel in Paris three years earlier with an influential Brazilian businessman. When street protests swept Brazil in 2013, a protest camp was set up near Cabral’s apartment in Rio’s affluent Leblon neighborhood.
On Nov. 16, former governor Anthony Garotinho — who had published those photos of Cabral on his blog — was arrested on vote-buying allegations. Next morning, Cabral was arrested with 10 others, accused of heading a group that pocketed $66 million in bribes on state government contracts — including for the renovation of Rio's Maracana Stadium, where the 2014 World Cup final and Olympic opening and closing ceremonies were held.
Demonstrators wearing napkins on their heads and waving champagne bottles cheered as Cabral was driven through the gates of Rio’s Bangu prison.
Cabral continues to be a target for demonstrators, including those taking part in Tuesday’s violent protests against de Souza’s austerity plan.
“Sérgio Cabral stole everything,” said a firefighter, speaking on the condition of anonymity for fear of official reprisal.
Prosecutors say that during Cabral's tenure, from 2007 through 2014, he and his wife, Adriana Ancelmo, a lawyer who also is now in jail, spent millions on items including a luxury boat, art works and fine jewelry. That some of the money allegedly came from bribes related to the Maracana Stadium renovation has merely confirmed the skepticism of many Cariocas.
To further sour the post-Olympic mood, it has emerged this year that under Cabral and “Big Foot” (formerly Cabral’s vice governor), the Rio government gave billions of dollars in tax exemptions to scores of companies — including jewelry companies that made personal deliveries to the Cabrals and construction companies accused of paying bribes. According to the state’s Court of Accounts, jewelry firms alone saved $68 million by way of tax breaks from 2008 through 2013.
Not all the tax breaks were illicit. Brazilian states use them to compete with each other to encourage industries to move to their areas; Nissan, for example, built a car factory in Rio in 2014 after it got an exemption. A spokesman for the Rio government, commenting anonymously in accordance with internal regulations, said that the exemptions helped many sectors and that tax revenue from the jewelry industry rose as smaller companies operating informally went legal.
Other exemptions are harder to justify, such as those given to some “termas,” or spas; in Rio, these establishments are thinly disguised brothels.
Vinicius Cavalleiro, a state prosecutor in Rio investigating as much as $55 billion worth of exemptions granted from 2007 to 2015, described the practice as “a big cause of the state’s fiscal imbalance.” In October, a judge prohibited the state from granting further tax breaks.
Police officers, demoralized by salary delays, also blame the state's financial straits for a continuing surge in violent crime.
In 2008, a project was launched to expel armed drug gangs from the desperately poor communities in Rio known as favelas. Police bases were installed, and efforts were made to improve social conditions. But the improvements failed to materialize, and the project is foundering.
Short on arms and ammunition, the precarious police bases face regular assaults from drug gangs determined to recover lost territory, said Cpl. Anderson Valentim, an officer stationed in the Complexo do Alemao favela, where gunfights occur daily.
“We are fighting an enemy that has superior numbers and superior arms,” he said.
On Nov. 19, during an operation in the City of God favela, a police helicopter crashed, killing four officers. Many assumed the local drug gang had shot the helicopter down, although a preliminary probe found no evidence to support that.
Next day in a nearby patch of woods, relatives found the bodies of seven men that they said showed signs of an execution-style killing. Some of the men had police records, but relatives denied they were involved in the drug trade. Police say they are investigating.
Whether or not the seven deaths are found to have been a revenge killing by police, they underscore the pessimism that continues to pervade Rio. Improved security was one of the benefits the city was promised before the World Cup and the Olympics.
“The perception was that things were getting better,” said Cano, the sociologist. “Now the perception is everything is deteriorating.”