The World Cup table is set, now all we need is a room to place the Olympics: Rio’s double curse

Argentina beat Holland 4-2 on penalties, after playing a 0-0 draw. 20140710-063753-23873739.jpgThat’s the important part of the second World Cup semifinal. It was a dour match, with neither side taking risks in defence, and getting few clear openings in attack. It was really what we’ve come to expect at the top level, till Germany spoiled us the night before. We still ended with a respectable four goals a game over the semis.

So, Argentina can win in Brazil and the hosts can’t stop them. Nightmare number two still hovers over Brazil. To say that the Argentines are arrogant would not be nice, but it’s what many believe. Yesterday was also their Independence Day, so fate was smiling on them. So, let the haters and baiters have their say, but wish the finalists give us a super match on Sunday. Before that, Brazil has to raise itself to contest the symbolic playoff for third place, in Brasilia, the administrative capital, leaving Rio, the true heart of the country, to hail the finalists.

It is not easy to raise yourself from the fresh mental torture of a heavy defeat at home to play another match. It has to be about pride and heart. Nothing can erase the past, and the fear is that the fall from grace will be deeper if the national team lose again. It will be fascinating to see if and how the nation rallies behind the team. I’m not close enough to local politics to do more than repeat what I’ve read. The government had tried to raise its popularity on the back of the football love fest. Now, that’s evaporated. The huge spending on the tournament, some US$ 13 billion, could have gone to address many social needs. People are understandably unhappy about that, but seemed content to trade that spending off for a World Cup trophy. Now, the well is dry and the cup is gone. Thirst bites hard.

But, Brazil has not finished being parched. It will host another expensive international event soon, with the 2016 Olympic Games. The World Cup had been threatened by lack of preparedness, with much criticism from FIFA. On the face of it, the infrastructure and organization have held up well. But, the Olympics preparation is severely off track, reportedly just over 10 percent done, while London was 60 percent ready at the equivalent time. The International Olympics Committee Vice President has called it the “worst” state of preparation he’s ever seen. 20140710-060836-22116797.jpgSimon Jenkins, a hard-hitting British sports journalist, wrote a highly critical piece on the dual curse on Rio. He pours ice water on the proposals for ‘nomadic’ architecture, whereby Olympic structures could be transformed into schools. The promised further improvements in favela facilities seem stalled, but clearance of the areas has still gone ahead, with nearly 200,000 people moved–still far from Beijing’s 1.5 million. 20140710-061442-22482437.jpgEven an optimist would worry about the social trauma moves like this leave if successful. If they fail? Caramba!

All modern Olympics have been financial disasters for the hosts, leaving behind many ‘white elephants’. The eyesore of unused or underused or unnecessary structures in areas of pressing social needs is offensive enough. Dress that with the odour of privilege that trails behind the officials and dignitaries. Then top it off with the seemingly inevitable sleaze and graft that are bedfellows to these processes and you have the ingredients of a super social Molotov cocktail.

Based on recent games, the World Cup generates approximately US$3.5 billion in revenue (with most going to FIFA) and the Summer Olympics generate around US$5 billion (with most going to the IOC). Simple arithmetic tells us that the games will mean a net loss for the host country, unless the host makes up the difference with increased income from tourism and investment during the games or—as a result of the games—in the future. Recent history also shows that the projected costs are too low ad the forecast revenues and gains too optimistic. Another bomb waiting to explode. So, Rio is near to ‘riot’ in many discomforting ways. Brazil’s mid-2000s boom, needed to be extended and accelerate to propel it from emerging to developed economy. It may well re-emerge at a place it left decades ago.

The list of modern Olympic financial planning disasters makes for horrible memories: Montreal 1976, Sydney 2000, Athens 2004, Beijing 2008, London 2012. It is a roll call of subsequent economic meltdown–though London is still a work-in-progress. Greece’s financial catastrophe has its roots in the Olympic spending debacle.

So, Rio, the capital of carnivals, has a cavalcade of hearses waiting to roll on its streets as hopes of success die.

None of these problems seem evident to most visitors. Most are only concerned with the main events, and rightly so. Residents shouldn’t hold grudges against the tourists, who fill bars and restaurants and offer easy money, at least for a few weeks. My wife blanched at paying R$20 (about US$10) for three popsicles on Copacabana beach yesterday, but she paid, and in five minutes they were done, while the vendor kept doing his disappearing coin trick on a new set of punters. That was too ironic a ploy.

I may get lucky and come back to Rio for the Olympics. My older daughter tried to learn some Portuguese before this trip and has been putting it to good use. She’s talked about learning it properly and looking to encourage her employer to open a Rio office, where she’d work. All power to that thinking. Hopefully, that would deal with lodgings. Sort out transport and the deal could be done, for me, though, a bed is good enough.

Jamaica, who sees itself as part of the Olympics success package, is just getting out of some deep economic do-do. How ironic that we could help push Rio’s head firmly into that malodorous pile.

Author: Dennis G Jones (aka 'The Grasshopper')

Retired International Monetary Fund economist. My blog is for organizing my ideas and thoughts about a range of topics. I was born in Jamaica, but spent 30 years being educated, living, and working in the UK. I lived in the USA for two decades, and worked and travelled abroad, extensively, throughout my careers and for pleasure. My views have a wide international perspective. Father of 3 girls. Also, married to an economist. :)