Budgeting Brazil

The Rio Olympics have been deemed a total disaster by some, and an accomplishment by others. The games came to a close with the impeachment of a president, the displacement of thousands of families and the installation of a public golf course. It was the first time a South American country hosted the Olympic Games, which is a merit in itself. but the timing of the Games, as well as their infrastructural execution, was just wrong. 

It was a fairy tale beginning in 2009 when Rio won the bid to host both the 2014 FIFA World Cup and the Olympic Games. Brazil was going through an economic boom; it was an investor’s paradise and it seemed to hold all the cards to pull off the double whammy that is hosting the biggest sporting spectacles in the world. While building the infrastructure that would hold up the World Cup and the Games, their economic bubble burst, leaving Brazil with a shaky foundation that eventually toppled over, taking social and political stability along with it. 

It would be unfair to say that the Olympics were the sole contributor to Brazil’s current condition, but they did contribute to the general unrest in the country in a great way. Brazil already had the reputation of displacing millions of low-income families to build venues and malls since their hosting the Pan-American Games in 1963. 

The construction of new venues and structures for these events “have not benefited the [poorer population] at all,” said Fernanda Verri, a PhD Candidate at UCLA in Urban Planning, in a Skype interview. According to Verri, it is customary for those who cannot afford to buy or rent a home to occupy certain parts of the city without property titles, but many of these people have lived in these areas, which we know as favelas, for more than ten years.

“The state provides them with two options as an alternative to [being displaced]: first, [the families] can receive money to buy or rent another home,” Verri said. “The second option is to opt to obtain social housing.” She added that most of the time, the money received in exchange for a family leaving its life-long home is usually not enough to live anywhere within the city. The location for most social housing is on the outskirts of the city, usually far away from where many of these people work and have made their relationships. 

“Imagine, they already have financial problems, so they have to try to live near their place of work because they cannot spend a lot of money on transportation. When you kick them out of the city, they have to spend more money to get to work, and might lose their job because they won’t arrive on time,” Verri added. 

According to an article in The Washington Post, approximately 60,000 people in Brazil lost their homes due to the Olympics between 2009 and 2013. The government never told those who live in lower-income neighborhoods that venues would be built on their homes. As Verri, explained, the government simply gave the families option one and option two and expected them to leave.

Brazil declaring a state of financial disaster before the Games also contributed to the tension between Brazilians and their government.

“The timing was terrible as state revenues from oil royalties had plunged along with the private of crude in the run-up to the Games, depriving authorities of billions of dollars in anticipated revenue,” Russ Mould, AJ Bell’s investment director, said in an email interview. AJ Bell is one of the biggest investment ventures in the world based out of Manchester. 

“Some of the costs of the Games were borne by Brazil’s federal budget and some by the city of Rio,” Mould added. What this essentially means is that Brazil was running out of money, and had to budget what it had between social spending and the Games themselves. 

According to the Council of Foreign Relations, Brazil was facing, and still is facing, its worst recession in decades. The recession contributed to the financial crisis in the Rio de Janeiro state government which is responsible for public services such as hospitals and the police in the city of Rio. The city required a bailout that would cover not only the building of the venues but that would also pay for the drastic security measures the city had to take during the Games. Emphasis on during the Games.

On the bright side, Brazil is one of the few Olympic cities not to overspend their budget by an absurd amount. Mould pointed out that “the average overspend on every Summer and Winter Games since 1960 [is] at 156 percent — so at least in that respect Brazil’s 50 percent overshoot does not look so bad.” Other cities like Montreal have overspent up to 750 percent.

Compared to other Olympic Cities, Brazil is in the “second-category” of Olympic success stories according to Marty Conway, professor of Sports Management at Georgetown University and advisor for “mega-events” such as the Qatar World Cup. 

“[Rio] is not like London, not like Barcelona [and] not like Sydney where [the city] flourished after [the Games],” Conway said. For cities like Barcelona, the Games were a coming out party in a lot of ways, and it ultimately became a go-to tourist destination in Europe as a result. “Rio is going to be in that secondary category, overall lesser benefit.” 

Rio, Athens and Montreal are examples of how the Olympics are more costly than profitable. According to The Guardian, it took 40 years for Montreal to pay a debt of $1.6 billion from when it the hosted the games back in 1976. Athens’ Olympic venues look more like ruins than the buildings that have existed since the Greek Empire, and Athens has been an economic funk ever since. Right now, Brazil does not look like it will flourish any time soon. 

But will Brazil be in an economic meltdown? In immediate hindsight, yes, but according to Conway, “it takes four to six year to look back on the use of [the] facilities after the events are over to really get a full picture of how effective the facility planning was.” 

Most of the time, when venues for the Games are created, the city has a plan-of-action of what to do with the venues when the Olympics are over. The infrastructure benefits flourish from the practical use of these leftover stadiums, fields and complexes. For example, the Olympic Village is to be adapted to function as a luxury condominium, but will this happen? A good sign is the re-utilization of venues, like taking the golf course made for the games and making it public. That will allow lower and middle-class peoples to have a space to culture golfing talents and golf culture. Never mind the fact that they have been displaced to the skirt of the city. It is the efficient use of these venues that help qualify a city as an Olympic success or an Olympic disaster.

All this takes time. As Mould also pointed out, since 1992, “the countries hosting the Summer Olympic Games have seen an average increase of 25 percent in their local stock markets in the years following the Games,” but we should point out that this overturn does not happen right after the Olympics pack up and leave town. There might be hope for Rio after all.

The International Olympic Committee recognizes that hosting the Olympics can be a disaster, and they know it is partially their fault for requiring the venues and the infrastructure they do. Because of this, the IOC has instituted a plan, a plan that seeks to get people to actually want to host the games and not have $30 million in debt as a result. We see you Montreal, and we feel your pain. Olympic Agenda 2020 is the name of the project; it seeks to make the economic burden of hosting the Olympics, less of a burden. The plan aims to make the Olympics a more affordable project, not something that would be reserved for what Conway calls “developed economies.” 

The IOC is in trouble. Only two cities bid for the 2018 Winter Olympics, because so many cities have ended up in insurmountable amounts of debt. Olympic Agenda 2020 seeks to make the Games a more accessible goal as well as a more profitable one.

Olympic Agenda 2020 aims to subsidize some of the bigger venues, and insist on creating temporary locations for events to happen. Temporary locations are venues that can be torn apart easily or that can be built in a way that can later be dismantled and sold to other countries or professional sports leagues that need more venues.

Conway emphasizes the fact that a lot of countries do not have significant professional leagues to take over the stadiums built for the Olympics. Creating temporary venues, such as the beach volleyball courts in London, could be a cost-effective way of dealing with making large infrastructure that will never be used again. 

For the London 2012 Olympics, the volleyball courts were set up in the Horse Guards Parade, making it easy to break them apart later because the U.K. does not have a successful beach volleyball league. 

Another example is how Qatar is building their stadiums for the World Cup, which they will be hosting in 2016. They do not have a large soccer league within the country, so they are building stadiums that they can dismantle and then sell elsewhere for the purpose of making a profit and helping countries cut down on cost and materials themselves for their new stadiums. Recycling is fun, right?

The Olympics have insofar been almost exclusively held in developed economies, mostly because of their high cost. These countries have been able to pull through the years of debt and the struggles of infrastructure: some have even benefitted from the games. Rio was the first country in South America to host the Olympics and although the immediate future does not look promising, the Games might shed a new light on the possibility of a “developing economy” to host a mega event. Brazil opened the floodgates of everything wrong with hosting the Olympics, but at the same time it has created a possibility for the Southern Cone to host mega games.

Rio has been one of the first host cities to hold the Games without going severely over budget; they were also the first games to have refugees compete. The Rio Games were a true example of Olympic spirit. No other games had a viral picture of two athletes from North and South Korea, or an image of athletes from the so-called West and Middle East going at it in beach volleyball. Humanity and sportsmanship were seen in the way athletes built each other up, one positive among the many problems Rio faced during the 2016 Olympic Games.