With the 2016 Summer Olympics Games upon us, much of the world’s media has descended on Rio to cover more than 300 events, across 28 sports, for the next three weeks. Early reports have already complimented the facilities in place. This should not come as a surprise. An estimated $14 billion has been spent to date and includes new stadia, sports facilities, transport and communications infrastructure, accommodation, security, etc. The scale of investment is on a par with London 2012 but comes on the back of a similar outlay during the 2014 World Cup. That’s close to $30 billion dollars in 24 months.
While the Games will probably be a sporting success, it’s hard to see how this investment can be justified. A growing list of cities, are now home to unused, dilapidated or demolished Olympic venues. Brazil is likely to encounter similar problems in the years ahead despite the promise of “legacy” effects. Even London recently reported a drop in sports participation four years on from the most recent Summer Games.
Brazil of course will be no stranger to this. Estádio Nacional in Brasília, the second most expensive stadium on the planet, was rebuilt for the 2014 World Cup. The 70,000 seat arena is now primarily used as a bus terminal.
Over the past 40 years, only the Los Angles Summer Games in 1984 generated a net surplus. This was a consequence of the weakened bargaining position of the International Olympic Committee (IOC) when faced with just one finalised bid to host the Games that summer. Riots (1968), terrorism (1972), public debt (1976) and boycott (1980) had all marred the Olympics in the decade beforehand. Los Angeles negotiated a deal with the IOC that maximised the economic benefits to the city.
Since 1984 other cities have jumped on the bandwagon, in an attempt to regenerate urban areas and turn a net profit. While Barcelona and London have been notable example of ‘success’, they failed to generate any financial surplus. This should not be a surprise.
Sporting events like these should not be viewed as investments. They are primarily consumption products. In the past the Games have brought other benefits; mainly a sense of national pride and increased levels of life satisfaction and happiness. If one monetises these, research suggests the Games are worth the cost. The richer the country, the greater the gain. Citizens from wealthier countries need a much bigger increase in income, to those from poorer countries, in order to experience the same jump in happiness.
And herein lies the problem for Brazil. The country is in the unique position of probably being the first developing democracy to stage the Summer Games (the extent of Mexican democracy in 1968 is debatable). This has brought with it problems. The riots at the World Cup were a manifestation of this. The extent to which the Games will make the population ‘happier’ is questionable. With political, economic, health, environmental and housing crises all present, these Games may not be a repeat of the past.
Rio is on the brink of its biggest ever party. A $14 billion hangover is waiting. The city needs to make the most of the next three weeks. While they party, the real winners are probably the taxpayers in Illinois and Spain. Two of the failed bidders for the 2016 Games.