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Gold medal for hubris

30 June 2016 By Martin Langfield

When Rio de Janeiro was awarded the 2016 Olympic Games, Brazil’s then-President Luiz Inacio Lula da Silva was in his pomp. As the bidding process began in 2007, Latin America’s biggest economy was riding a commodities boom and the popular leader was looking to brand his country as a rising world power. He had even announced plans for a nuclear submarine. Brazil wasn’t the United States, he said, “but we are getting there.” 

With the opening ceremony only weeks away on Aug. 5, those days are long gone. The global financial crisis hit even before Rio was chosen. Today’s Brazilian economy has more specific troubles. Statist mismanagement and low commodity prices mean output is likely to keep shrinking, by around 4 percent in 2016.

As for the games, a few competitors are pulling out because of concerns over the Zika virus. The government is lending the cash-strapped state of Rio de Janeiro $850 million. Investigators are looking into some Olympic contracts for possible corruption. Waters to be used for sailing and swimming events will not now get the promised cleanup. Earlier this month a soldier shot dead a jaguar, a near-threatened species, at an Olympic torch ceremony in the Amazon.

Despite such real and symbolic problems, venues will be more or less ready after a last-minute scramble. But Brazil is spending some 40 billion reais ($12 billion) on the games, having laid out a comparable amount on the 2014 soccer World Cup. Little of that will help the Brazilians who need it most.

In fact hosts don’t usually benefit from such sporting mega-events, economist Andrew Zimbalist writes in his book “Circus Maximus.” Visitors – Rio is expecting some 500,000 – may prove cheapskates, keep other travelers away, or suck spending from businesses not related to the spectacle at hand. Los Angeles in 1984 achieved a surplus, but the use of existing infrastructure helped avoid pricey white elephants. Brazil spent millions on a largely unused 42,000-seat stadium in the Amazon city of Manaus for the World Cup, for example.

Lula is facing a corruption investigation while his protégée and successor Dilma Rousseff is suspended pending an impeachment trial, parts of which could coincide embarrassingly with the games. As with the World Cup, the fabled warmth of Brazilians as hosts will be on display. But the hangover may be a sour one.

 

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