Rio Olympics’ Delayed Budget Ready Amid Public Scrutiny of Costs

Photographer: Yasuyoshi Chiba/AFP/Getty Images

Aerial view of the construction site of the Olympic and Paralympic Village at Barra da Tijuca, in Rio de Janeiro, Brazil, on December 3, 2013. Close

Aerial view of the construction site of the Olympic and Paralympic Village at Barra da... Read More

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Photographer: Yasuyoshi Chiba/AFP/Getty Images

Aerial view of the construction site of the Olympic and Paralympic Village at Barra da Tijuca, in Rio de Janeiro, Brazil, on December 3, 2013.

Rio de Janeiro’s budget for the 2016 Summer Olympics will be released by the end of January after months of political wrangling following massive public protests over the country’s spending priorities.

The budget was due in April, and the delays raise concerns about the coastal city’s ability to keep pledges made when it was picked to be the first South American host of the biggest multisport event. Brazil’s national auditor said in September that organizers spent just 92 million reais ($39 million). That’s 5.5 percent of the 1.67 billion reais budgeted for the three years through 2012.

“We aim to disclose the budget by the end of the month,” Mario Andrada, Rio 2016’s director of communications, said in an interview. Following months of wrangling over who pays for what, the games’ organizing committee, state, city and the Brazilian government have now come up with an updated figure for the cost of the games which is likely to be far higher than initial estimates.

Rio hasn’t updated its Olympic budget figures from those used in its 2009 bid. It said then that organizing the games would cost $2.8 billion and a further $11.6 billion would be spent on infrastructure. Organizers have warned that those costs are likely to rise, and in August the Rio 2016’s Chief Operating Officer Leo Gryner said his team would probably need to tap a $700 million contingency fund from Brazil’s government to cover a shortfall.

Increased Costs

Staging the games is often more expensive than the bidders plan. In 2007, after underestimating the cost of cleaning up the Olympic Park site and the construction of venues, the U.K. government more than tripled the original spending plan for the 2012 games to 9.3 billion pounds ($15.2 billion).

For Brazil’s political leaders, spending became an issue after the country’s biggest protests in decades. Millions took to the streets and voiced anger about failings including poor public health and education at a time when billions are being pumped into sporting events. Brazil is also staging soccer’s World Cup this year.

Olympic budgets are always underestimated as part of the years-long competition to win the games, said Andrew Zimbalist, an economist at Smith College in Northampton, Massachusetts, and author of 12 books on the business of sports. He said public pressure in Brazil means officials will try to keep the budget as low as they can get away with.

“When the public comes along and says, ‘Don’t spend all this money and if you do, we’re counting where you’re spending,’ it tightens all of the pressure,” Zimbalist said in a telephone interview.

Negotiations

Negotiations between local and national government over who should pay for parts of the games as well as the August resignation of the head of the Olympic Public Authority, a body responsible for coordinating the efforts of the three levels of government, exacerbated the delays in putting together a comprehensive financial settlement.

Thomas Bach, the new head of the International Olympic Committee, arrives for his first trip to Brazil next week, where he’ll start by meeting President Dilma Rousseff. Bach has expressed concern at the pace.

“We have to realize that there is not a single moment to lose, that every effort has to be made every day to bring the construction of Olympic sites and infrastructure forward,” the German told reporters in December.

A tender for one of the most controversial projects, the canoe slalom venue in northern Rio, hasn’t begun with responsibility being switched from state to city government. Concerns also persist about the polluted Guanabara Bay, the iconic location for the games’ sailing events.

“What will be essential and crucial for the success of Rio will be a seamless cooperation and coordination among different levels of government and the organizing committee,” Bach said. Coordination, he added, is “definitely needed to have successful Games and to meet the schedules.”

To contact the reporter on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net

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