Rio Games are an Olympic economic disaster

Judging from the disastrous news surrounding the Rio de Janeiro Olympics, the best thing that could happen to Latin American countries—or perhaps to all countries that apply to be hosts of future Olympic Games—is to lose their bids, and save themselves from a monumental waste of money.

The Rio Olympics, the first to be held in South America, may go down in history as an economic fiasco and a public relations embarrassment.

It’s no wonder that 63 per cent of Brazilians said the Olympics will do more damage than good to Brazil, according to a recent Datafolha poll. Almost everything that could go wrong has gone wrong.

Latin ViewThe Olympics are starting amid Brazil’s worst economic and political crisis in recent memory. The country’s economy is expected to fall by nearly 4 per cent this year, and an ongoing political scandal has already resulted in the suspension of former president Dilma Rousseff, and in charges against her predecessor, Luiz Inacio Lula da Silva, and several key legislators and corporate leaders.

In addition, police recently announced the arrest of a group of Islamic State supporters who were planning a terrorist attack, there are fears about Zika-carrying mosquitoes, toxic waste in the Rio de Janeiro bay has triggered calls to suspend the Games’ water competitions, and many facilities built for the Olympics were not ready, or were only half-ready, for the August 5 opening ceremony.

But, while much of this may be overshadowed in coming days by the athletic competitions and the cheerful images of the Cariocas—as Rio residents are known—dancing samba on the streets, the economic balance of these Olympics may hurt Brazilians for years to come.

I was reminded of this by sports economist Andrew Zimbalist, the author of Circus Maximus: The economic gamble behind hosting the Olympics and the World Cup, a book that rebukes claims by many governments and interested construction companies that these mega-events result in major gains for their host countries.

“The net outcome of the Rio Games is that they will have spent $20 billion, they will receive $4.5 billion in revenue, and they will end up with a $15 billion deficit,” Zimbalist told me in a telephone interview.

Zimbalist added that “Rio is massively underprepared.” The city didn’t have the transportation, communications, hospitality and services facilities to host Olympic Games, and most promises by the federal, state and city governments to clean the Rio bay and carry out other public works that would benefit the local populations for decades to come were never met, he said.

But, perhaps more interestingly, this may not be an exception to the rule. While the Rio Olympics were a notoriously bad idea from an economic standpoint, the same can be said about the 2014 Winter Olympics in Sochi, Russia, and about several others, Zimbalist said.

Countries spend monumental sums of money for these mega-events, which most often can’t be recovered, he said. Russia spent $50 billion for the Sochi Games, and China spent $40 billion for the 2008 Summer Olympics in Beijing. According to Zimbalist’s figures, of the estimated $50 billion spent by Russia for the Sochi Games, the country only generated about $2.5 billion.

Most often, “it’s a very bad idea for developing countries to host these events, and for developed countries as well,” Zimbalist says. There have been a few exceptions, like the Los Angeles 1984 Summer Olympics, which was a success because the city already had university dormitories and other facilities to host the event. But in most cases, it’s a net loss, he said.

My opinion: The Rio de Janeiro Olympics are the result of an ego trip by former Brazilian President Lula. In 2009, at the height of Brazil’s commodity-driven economic boom, Lula led a diplomatic effort to bring the Olympics to Brazil as part of his campaign to become a world leader, much like Putin did with the Sochi Games.

Next time a country bids for Olympic Games or a World Cup tournament, it should hire a credible independent firm to evaluate the economic merits of holding such an event, and have its Congress approve it. Otherwise, many of these mega-events will continue to be vanity trips for politicians that will make a few construction moguls rich, but will leave their countries with a huge bill to pay.

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