The mayor of Rio de Janeiro plans to seek permission to issue $500 million worth of municipal debt to help finance the 2016 Olympics. Brazil needs to invest more than $30 billion in preparation for the games and the 2014 World Cup, so the mayor’s move isn’t a shocker. It does, however, underscore two ongoing problems here.
Infrastructure is crumbling in the city about to host the world’s two biggest sporting events. Neglect has been ongoing; this is the first such bond the city has issued in 10 years. Which brings us to the second problem. Foreign investors are pouring money into Brazil’s booming economy in search of big returns. As a result, Brazil’s currency is now among the most overvalued in the world. The surging currency makes Brazilian stuff really expensive on the world market, which is bad for manufacturers here trying to outcompete China. It also makes Brazilian living really expensive for people paid in foreign currency, which is bad for, well, me. Rio’s Olympics bond is likely to be yet another magnet for foreign cash, thus making the problem worse.