Hosting the Olympics: The Developing World’s Burden?

By Jackson Celestin 

The Olympic Games are supposed to be a celebration – a demonstration of global unity and national pride wrapped in ancient ceremony.  For the host city, the Olympics is more than just an opportunity to show off to the world.  It affords a collapsed timeframe for cities to take on huge projects that jolt their economy and catalyze long-term growth.  Though some cities have benefitted from the Olympics, for others, the hosting experience has been less than golden.  The expensive infrastructure and operating costs of Olympic projects have left cities with crippling debt that stagnates development rather than kick-starts it.

As Rio de Janeiro, Brazil prepares for the 2016 Olympic Games, the outlook is not positive.  The glamor of hosting this event has been overshadowed by economic, social, and political turmoil.  Compared to past hosts, Rio is expecting to take a major economic loss from hosting the Olympics and to feel the impact for years to come.  To understand Rio’s Olympics struggles, it is important to compare Rio to previous hosts while keeping Rio’s unique circumstances in mind. This article provides this analysis and concludes with a prediction of Rio’s post-Olympic status and questions for further debate.

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Protestors marching on the National Congress building in Brasilia on March 13, 2016 (just under five months before the 2016 Olympic Games in Rio).  Photo courtesy of Flickr user Agência Brasil Fotografias, under a Creative Commons Attribution 2.0 Generic License.

Rio de Janiero, Brazil

Rio’s woes with hosting the Olympics started when Brazil hosted the 2014 World Cup.  Considering the experience Brazil gained from hosting the 1992 Earth Summit and the 2007 Pan American Games and the country’s strong economic growth from 2007 to 2008, the FIFA Executive Committee deemed Brazil willing and able to not only host the 2014 World Cup, but also reap major economic and infrastructure benefits in the process.  However, the construction of costly stadiums, unfinished public transportation projects, and reports of forced displacement led to delays and violent protests.  Since then, Brazil has not seen the economic improvements that generally accompany international sporting events and the spectators and tourists that attend them.  The story is similar today: the country is experiencing civil unrest over political corruption, trying to get out of a deep economic recession, and attempting to contain the Zika virus all while preparing for the Olympics.  Though the International Olympics Committee (IOC) has adopted its own independent organizational and budget model, the shortcomings from the World Cup created a fragile and unstable environment to plan the Games around, and consequently, it is improbable that Rio will walk away from the Olympics in the green.

 Cases

 Barcelona, Spain

Barcelona experienced great success in hosting the 1992 Olympic Games.  From the moment Barcelona was nominated, the city saw its unemployment fall dramatically, housing market come back to life, and construction industry boom.  Impressive as these impacts were, what was more surprising was how Barcelona sustained its growth.  For over a decade, Barcelona went on to set yearly growth records across all indicators – employment, investment, income, and more.  Able to both successfully prepare for and maintain long-term growth from the Games, the “Barcelona model” has set the standard for hosting not only the Olympics, but also mega-events in general.

Barcelona’s success can be attributed to three things: its dynamic budget that did not wholly rely on public funding, superb organization, and urban transformation efforts.  Feeding off the expectation that investing in Olympics projects would make the city more attractive, Barcelona sparked high levels of private investments that accounted for 36.8 percent of the Olympic building work and focused primarily on housing, hotels, and business centers.  In doing so, the city avoided a reliance on public funding and use of tax dollars to pay for improvements.  The city received enough funding that it was able to afford expensive infrastructure upgrades and organizational costs.  A part of that financing also went towards establishing a “Olympic Organising Committee” that, because it was well endowed, adequately prepared Barcelona to host.  Looking to maximize on investments, the Committee incorporated urban transformation efforts into the Olympics preparations such as improving urban infrastructure; creating both temporary and permanent jobs; and subsequently, increasing general economic activity, income, and wellbeing.  Due to its unique budget structure, organizational institutions, and urban transformation efforts, Barcelona was able to use the 1992 Olympic Games as a catalyst for immediate and sustainable growth.

Athens, Greece

In contrast to Barcelona’s success, Athens experienced a major financial deficit after hosting the Games in 2004.  Organizers emphasized investing in infrastructure, including a new airport, subway system, and tram service.  Unfortunately, postponed construction and poor financial planning led to inefficiencies and higher-than-expected costs.  Athens’ Olympics expenditures cost twice as much as its budget, and the city took on $12 billion in debt (a deficit of 6.1 percent of gross domestic product, or GDP).

Unlike the “Barcelona Model,” Athens relied heavily on public funding and made expensive Olympic facility upgrades without plans for using them after the Games.  In terms of funding, the city did little to attract private investors and relied almost entirely on public funding and unsustainable loans.  Athens’ planners were also disorganized and inefficient, which led to construction delays and irresponsible spending.  For example, they fell behind schedule and postponed building the Olympic facilities to 2000, which eventually led to a rush to finish the facilities on time and higher-than-expected costs.  On top of that, rather than saving money by building temporary stadiums like London did in 2012, the majority of the budget was spent on building permanent facilities that were never used again.  Overall, the city’s overuse of public funding and focus on the Olympics facilities dug them into a hole of long-term debt.

Rio compared to Barcelona and Athens

Rio shares characteristics with both Barcelona and Athens.  Looking first at it similarities there may be reason to believe that Rio could benefit economically from hosting the Games.  Both Rio and Barcelona raised a significant amount of private funding, at approximately 60 percent of their respective Olympic budgets compared to Athens with only 16 percent.   Both Rio and Barcelona have well-funded organization committees, as they each spent well over one billion dollars funding them.  However, in terms of implementing urban transformation projects, Rio has sidelined many of its local projects to prioritize building the Olympic facilities.  Consequently, the city has either fallen behind or completely dropped a number of public transportation projects, including a major metro renovation that is not expected to be fully operational until 2018. The city has also failed to alleviate Brazil’s skyrocketing unemployment rate, which has risen from 6.2 to 11.3 percent in just over two and a half years.

To see the similarities between Rio and Athens, one should look to the consequences of the World Cup in Rio.  Brazil heavily relied on public funding to complete the World Cup stadiums and spent over a third of the infrastructure budget doing it.  This unfortunately came at the cost of incomplete public infrastructure projects and massive public debt. Like in Athens, the stadiums were also consistently behind schedule, causing them to cost far more than anticipated.  Since the World Cup, the Rio stadiums have rarely been used and represent a misuse of funding that could have been reallocated and better used elsewhere (i.e. public infrastructure).  Each relying on public funding and pursuing expensive stadiums, both Brazil and Athens dug themselves into financial holes, which has carried over to the Olympics and created a potentially disastrous situation for Rio.

Conclusion: Prediction and Questions

Though Rio shares characteristics with both Barcelona and Athens, Rio’s economic struggles from hosting the World Cup suggests that its consequences from hosting the Olympics will continue long after the closing ceremonies.  Brazil’s reliance on public funding and focus on completing the World Cup stadiums has left Rio in a financial hole.  Beyond the immediate challenges of preparing for the Olympics, Rio is experiencing other societal issues that have caused unrest and deterred investors, including forced displacements, a presidential impeachment, a financial crisis, and health concerns.  Between the many comparisons Rio draws with Athens and the unstable state of affairs brought on by the World Cup, Rio should not be surprised to experience negative, long-term impacts from hosting the Olympics.

With regards to development, Athens’ and Rio’s struggles are not abnormal.  Studies already acknowledge that developing countries benefit less from hosting the Olympics than industrialized countries, despite the potential benefits.  Given these consistent issues, it raises questions:  Why does the International Olympic Committee (IOC) still burden developing states with the responsibility of hosting the Olympics if they regularly fail to benefit from them?  Is the IOC obligated to give these states a chance to use the Olympics to expedite development or should it prevent them from digging themselves into a deeper hole?  Does the IOC have a responsibility to provide more organizational or financial help for developing country hosts?  Whether developing countries should host or not, the IOC should prioritize answering these questions if it wishes to prevent future failures and save the Olympic Games from becoming the developing world’s burden.

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