Jan. 27 (Bloomberg) -- Sidney Levy, who heads Brazil’s preparations for the 2016 summer Olympics, says the projected 30 billion reais ($12.5 billion) games are a chance to show that the country can run a major project without scandal.
The 57-year-old took over Rio’s organizing committee in January 2013, and says preparation for the 2 1/2-weeks of competition can rebuild trust between the country and its business elites by proving things can be done “without corruption.” Last week, his committee said the operating budget increased by 25 percent to 7 billion reais, and tomorrow, a new capital spending plan -- originally estimated at 23 billion reais -- will be released.
“The time has come for the Brazilian people to understand and to believe that there are people in Brazil skilled enough to raise and spend 7 billion reais in a transparent way,” Levy said in a Jan. 23 interview at Rio 2016’s headquarters shortly after announcing the operating budget.
“They think it’s all mixed up with friends of him, friends of so-and-so,” he said. “The money behind the table, these guys are all going to be rich at the end. They really think that. So we’re here to prove the opposite.”
Forbes in November estimated the cost of corruption in Brazil in 2013 could be as high as $53 billion, and President Dilma Rousseff has fired several ministers over allegations of graft. Inflation has remained above the government’s target since 2010 and the economy had its slowest three-year growth in a decade from 2011-2013.
Frustration with the country’s political and business leaders sparked Brazil’s biggest protests in more than two decades. Millions marched last year over anger that started over a bus-fare increase. Demonstrations grew to include grievances about corruption, close relationships between companies and government officials and complaints that billions spent on sporting events would be better used to improve Brazil’s health and education systems.
Brazil moved to democracy from military rule in the early 1980s and since then it has struggled to tackle corruption, Andrew Zimbalist, an economist at Smith College in Northampton, Massachusetts, said in a telephone interview.
“You have a country that since its early steps of industrialization and independence it has had problems,” he said. “People in government posts where they have power and they use that power to benefit themselves. And of course there’s corruption and inefficiency in the private sector as well.”
The Rio games will follow this year’s soccer World Cup, and tomorrow authorities will announce an updated figure about how much public money will be spent on the Olympics.
Levy said the public sentiment is understandable.
“In so many areas Brazil has gone first world,” he said. “So we cannot tolerate that in so many other areas Brazil is still third world. We cannot agree with that. We have to go against that.”
The national mood led to an eighth-month delay in getting local Olympic budgets approved. While spending plans were expected in April, they were held up as local and national governments tried to decide the split of responsibilities.
Levy comes to the organizing committee from his post as CEO of commercial services company Valid Solucoes SA, where he started in 1994.
The protests “reinforced the need to separate private money from public money,” he said.
Last week, officials said the organizing budget for the 2 1/2 week games has risen 25 percent to 7 billion reais, a 1.4 billion reais subsidy from local and national government has been moved into the budget for infrastructure work, which in 2009 was estimated at 23 billion reais.
Levy said moving the costs out of organizers budget made sense, and means his organizing committee can say its costs are all privately financed. Items removed from the organizing budget include the purchase of 27,000 radio communication devices, energy generators and buses needed to ferry the thousands of athletes, team delegates and media around the coastal city.
In August the head of the Olympic Public Authority, a body responsible for coordinating the work of different groups, quit. Levy said next year’s general election means there is increased pressure to ensure the Olympic costs are palatable to the public.
The operating budget has increased from the original 5.6 billion reais plan because of new sports, more technology requirements and miscalculation of security costs and worker salaries, Levy said. The organizing committee staff will grow to several thousand by the time of the games.
70 Percent Funded
Sponsorship, merchandising, ticket sales and a $1.1 billion grant from the International Olympic Committee will make up the bulk of the operational budget, which according to Levy, is 70 percent funded.
Getting the remainder is going to be “tough,” he said. National shipping company Correios on Jan. 24 signed an agreement worth 300 million reais to be the games’ official logistics partner.
Brazil’s government has agreed to cover any shortfall, though such an outcome would mean organizers had failed, Levy said.
“We have to work for them not to do it: that’s what all these people are here to do,” Levy said, using a sweep of his right arm to point to those sitting in the open plan office. “It’s very important because then I think we will have failed” should the government have to increase spending.
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