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Rio de Janeiro wants to convert parts of the city's assets into cryptocurrencies

 


Brazil's second largest city, Rio de Janeiro, is planning to convert part of the city's revenue into cryptocurrencies. Mayor Eduardo Paes wants to make his city a magnet for cryptocurrencies and blockchain startups. Will Rio de Janeiro become the second Miami - or can we already talk about the second El Salvador?


It only took a few days for one of the optimistic forecasts for this year to come true: other public institutions will follow the example of El Salvador and Miami. The public sector is becoming more and more a bitcoin hodler.


Last week, during Rio Innovation Week, Rio de Janeiro Mayor Eduardo Paes announced that his city plans to invest 1 percent of city assets in cryptocurrencies. This probably means Bitcoin, but maybe other coins as well.


This investment plan is part of "Crypto Rio" - an initiative with which Paes wants to make Rio de Janeiro the Latin American crypto center. As part of this initiative, it should also be possible to pay taxes to the city in Bitcoin and receive a 10 percent discount in return. The city's two financial officers, Pedro Paulo and Chicão Bulhões, explained that the legal framework for this is currently being examined.


Paes is inspired by his US colleague Francis Suarez, the Bitcoin-enthusiastic mayor of Florida's metropolis Miami . Suarez discussed how to transform a metropolis into a technology hub with Paes via video link. In Miami, Suarez has used shrewd tax incentives and real or token bitcoin-friendly measures to attract several Silicon Valley companies to Miami. "We created a tsunami of possibilities," said Suarez, "We understood that we can be at the forefront of innovation and we invited developers here."


Of course, for Bitcoin and cryptocurrencies, this news is big. Rio de Janeiro is not just any small town, but the second largest city in Brazil. Around 6.7 million people live in the city and 11.6 million in the entire area. Gross National Product (GNP) ranges from $60 billion to $90 billion, depending on source and method, and at least $200 billion for the region as a whole. In 2014, Rio ranked 53rd worldwide among the economically strongest metropolitan regions.


For comparison: In the " bitcoin country " El Salvador live 6.5 million people who generate a GNP of 27 billion dollars (nominal) or 59 billion dollars (adjusted). This would make the possible “crypto metropolis” Rio de Janeiro larger than the “crypto country” El Salvador.


However, it is not clear how high the surpluses are that Rio de Janeiro generates for its treasury. I haven't found any meaningful information on this on the non-Portuguese Internet. It seems that the corona virus has severely shaken the city's finances, for example with the almost complete collapse of tourism, which is so important for Rio. It is already assumed that the city will have to accept losses of more than 7.5 million dollars in 2022. In addition, there is a wave of bankruptcies in the retail sector, almost 70 percent of which have slipped into bankruptcy.


At the end of 2019, the city was probably on the verge of insolvency. The city government had to stop payments to city government and health care workers . A loan from the Brazilian government helped Rio out of a tight spot, and proceeds from the privatization of parts of the public infrastructure, such as the water supply , further improved the financial situation. Still, Rio seems desperate for revenue. Last year, for example, the city issued an ordinance that significantly reduced interest on arrears for debt payments due, for example from tax obligations.


However, it is doubtful whether Eduardo Paes, like Francis Suarez, is actually passionate about Bitcoin and has a vision of Rio as a tech metropolis. The mayor is now in his third term, which has been interrupted by several breaks. As BlockTrainer reports , Brazilian crypto youtuber Carol Souza of UseCripto tells that Paes is known to be very corrupt and wants to use the push to prepare for the 2022 local elections. She would first like to wait and see whether the announcement will be followed by action or whether it will remain with marketing.

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