The road to Rio or ruin?

04 Aug 2016

The road to Rio or ruin?

Will Brazil gain an Olympic legacy once the 2016 Games have packed up and moved on from Rio de Janeiro? It could take decades to find out

Construction projects behind schedule and local business people and residents up in arms – these are just two of the headlines that follow preparations for big sporting events around the globe. Brazil, however, has outdone past Olympic host nations by compounding the devastating effects of the Zika virus with an economic downturn and political turmoil. Yet for all that, Rio 2016 CEO Sidney Levy has remained upbeat about the lasting effects the Olympic Games will have on the country.

Levy’s job requires optimism, but his views reflect those of Brazil’s business leaders, according to Ademar Couto, a partner and director at Odgers Berndtson’s São Paulo office, who has had his ear to the ground.

“Everyone is very enthusiastic about the Olympics,” says Couto. “We believe in the legacy of the Olympics. Yes, there’s political discord right now, but we also really believe that the Olympics will leave people with a great image of the country.

Brazilian businesses stand to gain from R$3 billion (cUS$850 million) of additional spending on goods and services with R$300 million (cUS$85 million) of that trickling down into the economy to benefit smaller companies and enterprises, according to International Olympic Committee (IOC) predictions. Following on from that, there are hopes that Rio de Janeiro itself will gain from a renewed focus and drive.

Economics journalist Binyamin Appelbaum considers cash and services contributed to a host nation by the IOC may never make up for the disruption and additional cost associated with the Games.

Writing for the New York Times magazine, Applebaum states that if a nation committed to renewing and upgrading a city’s infrastructure and transportation without the prospect of a Games to drive projects through, it would generate a feel-good factor just as great – possibly greater – than the Olympic effect. The reverse of the intended effect can also be true, he points out. During the London 2012 Games museum enthusiasts and theatre lovers were put off going to the city and there was an overall five per cent drop in London’s visitors in 2012 compared to the year before.

A recent University of Oxford study which revealed that every Games from 1968 onwards has exceeded its budget

“We have built a lot of stadiums and infrastructure for the Olympics – some of which are going to be reuseable, but some of which are going to be a waste of money,” Couto admits. “We might have to lose some of the gymnasiums in the future, because they are not in the ideal place and are too far away from everything.”

Committees considering bidding for a Games would be wise to review a recent University of Oxford study which revealed that every Games from 1968 onwards has exceeded its budget. Images of decaying swimming pools, abandoned running tracks and venues built for Athens 2004 and Beijing 2008 abound. Even the London Olympic stadium became the subject of bitter post-2012 arguments (still rumbling on in 2016) including whether the state-of-the-art athletics track should be sacrificed to create a better atmosphere for fans as it was being turned into the home ground for a football club. Rival bids for the venue closed when West Ham United FC stepped up with a deal and a plan to cover the track with retractable seating during football matches so the stadium could still be used for other international athletics meets.

Back in Rio, it seems most likely that city centre businesses will gain most directly from the 2016 Games investment in transport. Travel times (notoriously long in Rio) will be cut, even though not all the new transport infrastructure projects were completed following efforts to trim overblown costs. Some of the other extras – such as the floating stand to hold 4000 spectators at the rowing site on the lagoon – were also dropped. Despite projects being pulled, construction companies and those associated with construction, such as Caterpillar and John Deere, and architectural firms, for example, have benefited from a share in the Olympic spend.

“We have had a very good year for this sector of the economy – even here in São Paulo,” says Couto, echoing the US Government’s view. The Games’ organisers have signed more than 700 contracts with over 1200 suppliers as part of the preparations and sectors likely to see knock-on benefits include hospitality, advertising and leisure.

Rio’s hotels have seen major investment to meet Olympic and football world cup visitors’ demands and its organising association is confident that occupation levels will remain high even after the Olympics move on, thanks to the city’s continued global profile.

According to Douglas Viegas, director of the Brazilian Hotel Industry Association in Rio de Janeiro, the city sees close to 100 per cent occupation during international events such as the carnival.

The US Government predicts more private finance initiatives in Brazil in the future and less state financing in such infrastructure as airports which are being moved into the private sector. So Brazil, despite the widespread concerns, still looks good for business.

“Banks, financial institutions and other companies are starting to reopen branches that they had closed in Rio five or six years ago,” says Couto. “They are returning to the city and I believe that is just one of the upsides of the Olympics.”