Since 2015, Brazil has been mired in economic recession. The resulting financial strain has been particularly hard on state budgets, especially those of Rio Grande do Sul, Minas Gerais and Rio de Janeiro. (Rio de Janeiro's economy took an additional hit when oil prices dropped in mid-2014, and again when the federal funding that the state had been receiving to prepare for the 2014 World Cup and 2016 Olympics dried up.) Although the states combined generate nearly 30 percent of Brazil's gross domestic product, their finances are in bad shape. Last year, they were among four states whose capacity to repay their financial obligations to the federal government received a D rating — the second-lowest mark — from Brazil's National Treasury. Each state declared economic calamity that year, enabling their governments to implement extraordinary cost-cutting measures such as laying off public workers. Tax revenues in the states are so low, moreover, that the governments have resorted to paying their civil servants' salaries in installments.
In light of their unwieldy debt levels, the Brazilian government has demanded that the states trim their budgets, privatize state-owned companies (which include electricity, water and mining concerns) and freeze public wages. After all, Brasilia has financial problems of its own and can't afford to bail the states out unless their governments implement austerity measures. But austerity measures are unpopular among the voters in these states. In Rio de Janeiro, for example, a bill to allow the privatization of a local water company met with protests and still has not made it through the legislature.
By comparison, Espirito Santo is financially stable. Even though its government has not raised public wages, it has at least been able to pay civil servants on time and in full, which is more than Rio de Janeiro, Rio Grande do Sul and Minas Gerais can say. Yet that still wasn't enough to stop police from striking. Under the circumstances, then, the federal government's fears of police strikes cropping up in other states are well-founded. In fact, police in Rio Grande do Sul staged a partial strike in 2015. And if Espirito Santo offers any indication, proliferating police strikes could be devastating for Brazil's security. The federal government is also concerned that the demonstrations could fuel prison riots across the country, forcing Brasilia to intervene as it did in January, when it sent federal troops to help quell prison riots in a handful of northern states that left hundreds of prisoners dead.
Brazil is expected to pull out of its recession this year. But market analysts anticipate that the country's economy will grow slowly, if at all, depending on how the probe into the Petrobras-Odebrecht scandal unfolds over the coming year. Even if the economy resumes growth at the projected rate of 0.5 to 1 percent, it will not be enough to alleviate the financial troubles plaguing the country. States will have to keep selling off state-owned enterprises and cutting public spending. And in many states, public wages will probably stay frozen. Consequently, the police strikes in Espirito Santo and Rio de Janeiro could be the start of a dangerous trend in Brazil.