Rio Report: The Olympics Will Leave a Heavy Financial Burden on the Host City

Ryan Bailey@ryanjaybaileyFeatured ColumnistAugust 18, 2016

RIO DE JANEIRO, BRAZIL - AUGUST 10: Favelas are seen behind the Olympic rings on Day 5 of the Rio 2016 Olympic Games at the Sambodromo on August 10, 2016 in Rio de Janeiro, Brazil.  (Photo by Quinn Rooney/Getty Images)
Quinn Rooney/Getty Images

OLYMPIC STADIUM, RIO DE JANEIRO  When Usain Bolt saunters across the finish line at the Joao Havelange Olympic Stadium on his way to yet more podium glory, he may look up to see thousands of adoring fans—and more than a few empty seats.

If, however, he looks beyond the banks of seating through the wide gaps beneath the roof of the stadium, he will see hundreds of twinkling lights. They are the favelas on the hillsides that run through Rio like a series of veins and capillaries. There are few places in the city where one cannot see the low-rise, high-density, informally built housing where the city’s poorest residents reside.

Of Rio’s 6 million residents, around 1.5 million live in over 1,000 favelas. Although electricity and running water are common, many lack a formal sanitation system and are ruled by lawless—and ruthless—drug cartels.

RIO DE JANEIRO, BRAZIL - JULY 18:  A 'sound barrier' with posters advertising the Olympics is attached along a stretch of the main highway which links Rio's international airport to the city center and tourist areas running above the Mare favela community
Mario Tama/Getty Images

While Rio boasts many affluent neighbourhoods, the economic inequality is striking: Figures from 2012 found that 8.5 per cent of Brazilians live on less than the equivalent of $1.30 per day. This figure, set by Dilma Rousseff (the Brazilian president who has been suspended due to alleged manipulations of the federal budget) is the benchmark for the “extreme poverty line.”

Large swathes of the city are destitute, and spending on public health care is lacking. The putrid smell that comes from the Jacarepagua Lagoon beside the Olympic Park on windy days is a testament to poor sanitation. Shortly before the Games began, unpaid police workers protested at the airport with a “Welcome to Hell” banner.

The state of hospitals is not much better. In December 2015, the governor of Rio declared a health care state of emergency as money ran out for supplies, equipment and salaries.

I spoke with a police lieutenant who badly injured his back in the line of duty. Despite having a fractured vertebrae, he was discharged from a public hospital a few hours after admission and told to walk home.

“The public hospitals are in terrible shape here,” he said. “If you are sick and you do not have private health care, it is very bad news.”

It is clear that Rio needs functioning hospitals, funding for schools and better infrastructure. The city could have spent public money on improving the lives of the destitute masses.

Instead, they now have a velodrome and a world-class whitewater stadium.

RIO DE JANEIRO, BRAZIL - AUGUST 11:  Stefanie Horn of Italy competes during the Women's Kayak (K1) Semi-final on Day 6 of the Rio 2016 Olympics at Whitewater Stadium on August 11, 2016 in Rio de Janeiro, Brazil.  (Photo by Rob Carr/Getty Images)
Rob Carr/Getty Images

When Rio won the bid to host the Games in October 2009, the economy was thriving, thanks in large part to a boom in commodity exports. Now, however, the country is suffering its worst economic crisis since the 1930s. The Guardian reported the economy is set to shrink by 4 per cent in 2016 thanks to weaker commodity prices, low demand from China and political instability.

Average wages in Brazil are down around 3.3 per cent year-on-year. As a result, there are lower tax revenues and less money available for vital services.

According to the Financial Times, the total cost of the Rio Games to the Brazilian government is $4.6 billion. That is considerably cheaper than the $15 billion London spent on the 2012 Games, but Reuters places the overall cost of Olympic projects at around $12 billion. 

Thanks to “legacy projects” such as a $3 billion subway system and an improved airport—projects that have been criticised for only benefiting wealthy residents—some experts estimate the cost of the Games could actually rise to $20 billion, per CBS.

The wealth of sources available makes it difficult to get a definitive number on the cost of an Olympic Games, but if we were to assume the Financial Times’ figure of $4.6 billion to be accurate, it is still a phenomenal amount for a country like Brazil.

The Mises Institute has provided a useful comparison with the United States. The organisation claims Brazil’s national budget for 2015 was $631 billion—so the $4.6 billion Olympic spending is equal to 0.72 per cent of that budget.

If the U.S. were to spend 0.72 per cent of their $3.25 trillion national budget, they would be able to put on an Olympics worth $23 billion.

Gregorio Borgia/Associated Press

The Financial Times believes the Olympics to be one of the riskiest investments a city can make. Montreal took just over 30 years to pay back a $1.5 billion debt from hosting the 1976 Games. Greece, meanwhile, suffered so much from hosting the 2004 Games that it triggered an economic collapse from which it has yet to recover.

Images of 2004 Olympic venues in ruins will surely cause concern for Rio organisers. After all, once the 17 days of action have concluded, costs will continue to mount.

A 2004 Olympic venue in decay
A 2004 Olympic venue in decayThanassis Stavrakis/Associated Press

The Olympic Park will have maintenance costs. If the government intends to enact its sustainability project—which includes a plan to break down the handball arena and use it for schools—that will require funding.

The New York Times notes that subsequent maintenance and operation costs will typically rise above any revenues accrued during the event.

Many will argue that a host city benefits from tourism during and after the Games, but this is questionable. According to Americas Quarterly, Athens estimated a 10 per cent drop in tourism in the summer of 2004. Beijing did not see its number of visitors grow.

With all the negative publicity generated by the Zika virus and Olympic athletes who may or may not have had guns pointed at them, Rio seems unlikely to see a boost in tourism.

When Bolt holds court in the Olympic Stadium, surrounded by camera flashes and overpriced refreshments provided by multinational sponsors, there is a clear juxtaposition with the many thousands of people in the favelas that overlook The Greatest Show on Earth.

Rio, with its huge dichotomy between rich and poor, highlights the grotesque nature of the IOC’s travelling roadshow. The Olympiad may bring civic pride and fleeting attention, but it leaves a heavy burden on the people whom it does not benefit.

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