Rio getting ready to host the Olympics The organizers of Brazil’s Rio 2016 Olympic and Paralympic Games are making cutbacks of up to 30% to avoid going over the US$ 3.6 billion budget. Rio 2016 communications director Mario Andrada said the Brazilian public would not tolerate an overspend. 

    “The days of lavish spending are over,” said Andrada. “We need to be creative in the way we find these savings.”

    Events across 50 Olympic and Paralympic sports featuring about 15,000 athletes will not be affected.

    The organizing committee’s budget is privately financed, with separate budgets for stadiums and infrastructure, but the Brazilian government would have to meet the cost of any overspend.

    Ticket sales have been slow with only two million of the five million available sold so far.

    Rio getting ready to host the Olympics

    “People get upset about luxury and excess, we have to tighten our belts,” added Andrada.

    At the Confederations Cup held in Brazil in 2013, fans protested angrily at the amount of money spent – about US$ 4 billion on staging the 2014 World Cup.

    Salaries Slashed

    Brazil’s automotive industry has already signed agreements to have 33,000 workers included on the Employment Protection Program (PPE in the original acronym), in which employees accept to reduce up to 30% of working hours and pays and up to 15% of their salaries shall be paid through the Worker Support Fund (FAT). In exchange, employees cannot be fired.

    According to Luiz Moan, President of the National Association for Auto Manufacturers (Anfavea), in some cases, the agreement to include workers on the program was negotiated between companies and unions, but it still needs the approval of the federal government.

    In addition to the cases of working hours reduction, automakers have 7,200 workers on layoff scheme, that is, to have the contract of employment temporarily suspended.

    In Moan’s view, these measures represent the company’s effort not to lay off workers, despite the significant drop in sales. “These figures clearly demonstrate the constant effort of the automotive industry to hold employment to each company’s maximum possible rate,” reported the Anfavea’s president, when announcing, in São Paulo, the industry’s report.

    Currently companies in the automotive industry employ 133,600 people, 14,100 fewer people than in September last year. Drop in sales reached 32.5%, compared with the 296,300 units sold in September 2014 and the 200,100 cars sold last month. From January to September, 1.95 million vehicles were sold, 22.7% lower than the 2.52 million cars sold in the same period 2014. “We go back to the amount of sales from 2007,” said Moan.

    Due to the drop in sales, automakers slowed down the assembly line’s pace. Production fell 19.5% in September, compared with August. In September, 174,200 units were produced, against 216,600 in August. Compared with the same month in 2014, the drop reported last month reached 42.1%.

    One of the segments most affected by the drop in sales was the trucks. Despite the increase of 3.2% in sales between August and September, the 5,800 vehicles licensed last month show a drop of 44%, compared with September 2014. From January to September, the shrinkage is of 47.3%.

    A crisis of confidence compounded the effects of the economic activity’s slowdown, in Moan’s opinion. As an example, he highlighted the drop of 6.8% in sales of agricultural machinery between August and September, going from 4,200 to 3,900 units sold. In the year, the reduction in sales reaches 29.8%, going from 52,500 machines from January to September 2014, to 36,800 for the same period this year.

    “At this moment, in my view, there is no reason for such a drop,” he said.

    Moan noted that agribusiness has had a “positive performance”, producing good crops and charging favorable prices due to the devaluation of the real. “We regard much of this decline as factors linked to confidence index, both the consumers’ and the investor’s confidence.”

    Inflation Up

    Brazil’s official inflation rate, measured by the National Consumer Price Index (IPCA), closed out September up 0.54%, 0.32 percentage points above the 0.22% reported in August, according to an update released October 7 by the Brazilian Institute of Geography and Statistics (IBGE).

    With the result for September, the cumulative year-to-date rate (January-September) amounted to 7.64%, whereas the cumulative 12-month rate was 9.49%.

    The 7.64% in the year so far is well above the 4.61% reported for the same period in 2014 and the highest for the period since 2003, when the rate totaled 8.05%. The cumulative 12-month rate was slightly below the 9.53% reported in the 12-month period ending in September 2014. The monthly figure for September 2014 was 0.57%.

    According to the IBGE analysts, the latest figure resulted from increased household spending. Gas cylinders, which weigh 1.07% into the IPCA calculations, saw a 12.98% hike in September, and were the main inflation-driving item.

    Dollar outflow surpassed inflow in September, according to data released earlier this month by the Central Bank (BC). The balance stood at a negative US$ 111 million.

    Last month, the country’s financial flow-investments in bonds, profit remittances, dividends abroad, and direct foreign investment, among other transactions-led the exchange flow to a US$ 1,277 billion deficit. Thus, the surplus of US$ 1,167 billion in commercial flow – exchange transactions associated with exports and imports – was not enough to overturn the deficit.

    MP/ABr

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