By Saniat Choudhury
The Olympic Games held at Rio de Janeiro in Brazil this year concluded recently, and while the seemingly grandiose and lavish ending ceremony may have given the impression of a financially successful and affluent event, the story behind-the-scenes has actually been quite antithetical. The Olympics has certainly never been a cheap event to host, and long before the event kicked off many questioned the economic and infrastructural capability of a socio-economically struggling Brazil to organize what has been appropriately dubbed ‘The Greatest Show on Earth”. Now that the curtains to the Games finally receded, a post-event scrutiny of the whole thing reveals that those doubts have been thoroughly justified.
While Goldman Sachs named Brazil as one of the fastest growing economies in the early 2000s, largely due to its longstanding position as a BRIC nation, the recent global economic downturn made its mark on the country as well. The nation has been facing the worst recession in recent history, with the GDP plummeting by a 25-year low contraction of 3.8%. The results have been adverse: unemployment has amplified greatly, while inflation has reached double digits.
Amidst such economic turmoil, the nation has been drowned in a scandal of gargantuan proportions whose twisted veins have allegedly reached the highest echelons of the Brazilian political scenario. Prosecutors found executives from the state-run oil company Petrobras and other such institutions guilty of working in conjunction for more than a decade to manipulate inflation rates, and the rewards they reaped were shared by lawmakers and political denizens alike. The accusations have even reached President Dilma Rousseff, who was temporarily suspended and iconic ex-President Da Silva. Petrobras, once Brazil’s shining beacon of economic prosperity, had its investment diminished from $48 billion in 2013 to $23 billion last year, and these cutbacks have resulted in massive negative ripple effects across several sectors.
All of this resulted in a national deficit of more than 9%, with multiple rating agencies downgrading its debt to absolute garbage. Brazil was forced to cut its initial Olympic budget of $5 billion by almost 20%, and this saw amenities such as food provided to the athletes be reduced in terms of standards. While it is true the hosting of such events generates temporary employment, spikes tourism and foreign investment, Brazil’s present economic predicament, which has been further aggravated by the event itself, has meant that much of these positive effects had been largely nullified. Most of the profit from the event will not go back to the public, but to the shareholders and investors. Studies have shown that these benefits would only impact the wealthy – the supper-PACs who are responsible for bearing much of the cost. Furthermore, the hosting of such an event has meant higher taxes and spending cuts in other areas to simply break even.
In terms of infrastructure, Rio has been painfully inadequate. While the games have attracted over a million tourists, the city could only house about 52,000. Housing facilities, therefore, had to be indemnified by large cruise ships docked at the port, which had to be refurbished as well. Hotel accommodations had to be upgraded as well. An estimated $5 billion had to be allocated to improve transportation. A large amount of resources had to be dedicated towards security facilities as well, as Rio de Janeiro has been infamous for its splurge in crime. This has meant more increased police forces, larger salaries and the installation of facilities such as closed-circuit cameras for better supervision.
The Organizing Committees of Olympic Games (OCOG) reported that the nations hosting the games since 1984 have always broke even, but the statement is true only in terms of operating costs. It does not take into account, for example, the stadiums, Olympic village and the development of other such infrastructure. In fact, the 1992 Barcelona Olympics has been quoted repeatedly as the only economically successful one in recent history, with many of the other nations left in financial debt after hosting the Games. Brazil may just have to list itself among the latter.
Furthermore, the projected multiplier effect for the Rio Olympics has been largely exaggerated. Normally, it is very difficult to pinpoint the exact economic impact of any such mega-scale event, and there are a large number of studies by different firms with varying numbers. One source projected that for every $1 invested, $3.26 will be generated by 2027. Normally, these numbers are inflated by the influence of the government to make them more appealing towards the public, whose taxes are the major source of the event’s investment. In reality, the economic impact of the games has been just under $10 billion. Additionally, the infrastructure built for the events, including grand stadiums and other facilities, may go largely unutilized in the future, as has been the case with Greek Games. If that is the case for Brazil, the projected economic benefit for the long-term may be much lower than what has been calculated so far.
While the Rio Olympics has certainly been a memorable one, with superb demonstrations of athleticism in the form of Michael Phelps and Usain Bolt, the breaking of social barriers, and fantastic shows of sportsmanship and comradery, the resultant economic impact that it will have on a politically, financially and socially fraught Brazil can be adversely overwhelming. What is left to be seen is how deep this impact will reach before its effect is overturned.
