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Reports on this year’s Olympic Games in Rio de Janeiro have beaten a familiar path: The stadiums will not be built in time, the country is in disarray, the Games are a giant waste of money, the Zika virus will compromise athletes’ and patrons’ safety, and so on. The Olympics has been sharply dispraised from all corners and will likely continue to be, right up to August 5, when the Games begin. Inkl explores whether the Games are indeed a contributing factor to Brazil’s many woes, or just a handy scapegoat…
What we already know
Brazil is facing multiple crises that have overshadowed the approaching Rio Games. Organisers are in the midst of cutting $500m from the Games $1.9b operating budget. The operating budget itself barely comes close to the tens of billions that the Games will actually cost. Some estimates have the total cost for hosting the 2014 FIFA World Cup and the Rio Games hovering around $40bn. The construction of venues has run over time and over budget, and several are now being downsized to save on costs. The rubbish and sewerage-choked Guanabara Bay, set to host most of the aquatic events, will also not be clean in time.
Organisers are receiving flak over everything from disappointing ticket sales, to the lack of progress on the $2b subway extension linking Copacabana and Ipanema beaches to the Olympic Park. Although officials are now confident that the remaining infrastructure work will be finished in time, Brazilians also now have more pressing problems to deal with. Last year, the country’s once-vaunted economy contracted 3.8% and the Real lost a third of its value against the US dollar. One million Brazilians lost their jobs and another two million are expected to be out of work by the close of 2016.
The backdrop to the Games is immense political discord. The enormous graft scandal at the state-owned energy giant Petrobras and the ensuing criminal probe has tarred Brazil’s political class. President Dilma Rousseff is facing multiple impeachment actions. In the midst of this instability, the Zika virus has emerged as a serious public health threat in Brazil. Athletes and patrons alike are being warned off travelling to the Rio Games. And locals are furious that in a period of chaos, the government has poured vast sums into hosting the Olympics and the FIFA World Cup.
Undoubtedly, the Games will go ahead as they always do, but the International Olympic Committee (IOC) may well think twice before awarding the event to an emerging nation again. The problem is that the Games’ infrastructure needs are many: stadiums, airports, highways, railway lines, and housing and urban renewal projects to name but a few. So countries who host the Olympics incur massive costs. In the past governments have justified the multi-billion dollar splurges by citing the Games as an opportunity for economic growth and infrastructure renewal. However research shows that these sporting events usually end up being high-cost and low-return investments.
Beyond the headlines
The economic boom that began in 1994 was still kicking in 2009 when the IOC awarded the Games to Rio. At the time, Brazil had stepped onto the world stage and become one of the darlings of global economics as a member of the ‘BRIC’ club of emerging economic powers (along with Russia, India and China). But since then, two trends (both arguably beyond Brazil’s control) have reversed the nation’s fortunes: China’s diminishing appetite for natural resources, and the dramatic crash of oil prices.
CHINA: The incredible growth in commodities that Brazil exported to its largest trading partner, China, has undergone a dramatic U-turn. Trade with China, worth $2b in 2000 exploded to $83bn in 2013 as the Asian power consumed Brazil’s soybeans, beef and iron ore. In retrospect Brazil’s reliance on unimpeded economic growth appears to have been short sighted. The trade has peaked and is now facing a long decline. Some economists have warned that the country is staring at a decade of economic stagnation, high inflation and high joblessness.
OIL: Within Brazil, the state of Rio de Janeiro is heavily dependant on its oil reserves. Petroleum and associated products make up nearly half the state’s GDP. To a lesser extent, so is the nation at large. After reaching stratospheric heights in 2008 (over $130 per barrel), the price of crude oil has fallen off a cliff. By the start of 2009 the price stood at $40 per barrel. And although there have been some rare peaks, crude oil has stayed well below the long term average of $70 for most of the past decade. Today, the United States has become a gas exporter, Iran is set to re-enter the oil market, and OPEC nations will only cut supply in the direst of circumstances. So the long-term downward trend in oil prices will only continue to tear holes in Brazil’s economic outlook.
Worse still, while the storm was rolling in, successive governments in Brazil were tipping billions into wildly popular social welfare schemes in an attempt to drag millions of Brazilians out of poverty. Vast sums were levied and borrowed to pay for the ever-expanding welfare net which now takes up a staggering three quarters of the national budget. As a consequence, Brazilian debt is now rated as junk and although it is mostly held internally, it is likely that the International Monetary Fund will be compelled to intervene and impose austerity measures at some point.
The conclusion that many Brazilians are now drawing from this reversal of fortunes is that their political class is entirely compromised. The constant and glaring examples of corruption among Brazil’s ruling elite cannot simply be put down to individual greed. The state capitalism system by which Brazil operates its services and industries, is far too susceptible to structural corruption. So even though many politicians and businesspeople now face lengthy and well deserved sentences, Brazil’s woes are not likely to simply disappear with them.
Which brings us back to the Olympics. The Games will be upon Rio all too soon, and then will be over even faster. But when the spectacle has ended, Brazil’s economic pain will remain. In the lead-up to the Games there will be myriad reports about how the Olympics are to blame for Brazil’s misery. And undoubtedly, the expenditure of $40B is something Brazil can ill-afford today. But to ascribe Brazil’s long-standing, deep-rooted problems to a single investment decision (however unsound) makes no more sense than it does to blame the current situation on a handful of individuals. The only way in which Brazil will be able to recover and move on from its current plight is through a thorough examination of the systems and processes that conspired to shatter one of the world’s great economic miracles.
Thomas Wharton is a freelance journalist and writer at Inkl.
