Olympic events are often hailed as an economic boom for the host country. But when you consider the logistics involved in hosting, the numbers don't always come out positive.
The cost of hosting world events is staggering, but cities clamor for the honor—and the hope of high returns. Events like the Olympics and the World Cup bring in millions of people who spend astonishing amounts on tourist activities, lodging, and food and drink. Recently, though, some have begun to question whether or not those economic benefits are worth the near-impossible, and increasingly expensive, logistics of hosting these events.
Such events require large amount of investments from both the private and public sector. The 2008 Beijing Olympics, for example, cost about US $43 billion—a hefty tab, especially considering those facilities were later abandoned after little use. The Athens olympic events in 2004 cost $15 Billion, a budget that helped drive Greece into debt. Overall, 21 out of 22 stadiums built for the Athens events are unused. So when Brazil won the bid to host the 2016 Summer Olympics, people began to question whether its infrastructure could support the strain.
In the middle of a recession, Brazil is preparing to become the first South American country to host the world’s greatest sporting event. Government spending on the Olympic games has ballooned from US $2.93 billion to US $10.76 billion with enormous efforts to pump the brakes on spending. Hopefully the Rio Olympics won’t exceed the $11.6 billion spent on the 2014 World Cup. For some perspective, 3.43 million people watched the 64 games of the World Cup in Brazil with a highest average per game since the 1994 World Cup in the United States. As for the Rio Olympics, 7.5 million tickets went on sale in October.
Often, the chance to host world events gives cities the opportunity to fix critical infrastructure problems—ones that have hurt trade in the past. And while the 2014 World Cup preparations involved airport renovation and improved roads, the projects crippled production in other important sectors. It is still debated whether hosting the world cup had a negative economic impact on Brazil. In addition to the slowdown in production, structures built for the event are now largely useless. Far-flung cities in areas with small local teams that bring in crowds of 500-1000 viewers now have stadiums with 42,000 seats. The US $230 million Arena Pantanal in Cuiaba has been closed for emergency repairs since January 2015––just seven months after it opened.
With relatively few months until the games begin, the 2016 Olympics are facing a few big roadblocks. Mayor Eduardo Paes says they want to be as fiscally responsible as possible, and run an event that will have lasting positive effects for locals–cleaner water, less gridlock, and improved city services. But the situation in Rio is not going as planned. Not only has the multibillion dollar budget tripled, Rio has failed to build the 8 promised water treatment facilities that were to deal with the tainted water before the Olympics. An independent Associated Press investigation found that some areas were polluted up to 1.7 million times the levels that would be permittable on a California beach. Brazil has promised to address this issue with a budget of over $4 billion to add to the existing sanitation system, with a $1 billion loan from Japan and the promise of lasting economic health for the city.
The 2012 London Summer Olympics aimed at delivering sustainable and low-carbon games using sustainable materials for temporary structures. They set out specifications for the use and disposal of PVC fabrics, used recycled materials and avoided phthalate plasticisers, toxic plastic compounds used heavily before environmental regulations. Organizers of Rio 2016 said that their venues were designed based on nomadic architecture: they can be disassembled, processed, moved, and reused to ensure minimal impact to the environment.
In hopes of avoiding abandoned and useless arenas, seven out of the 34 venues for the games are temporary structures which will be dismantled after the games. Temporary facilities or structures are meant to help host nations minimize capital expenditure. Temporary venues also offer greater flexibility than permanent structures which are expensive to retrofit. Construction schedules also differ with temporary structures being built around 6 months before an event as compared to 4 to 5 years for permanent structures. In addition to moving more towards temporary structures, olympics planners are making better use of permanent structures. For example, apartment buildings built to house approximately thousands of athletes will later be transformed into condos.
Besides stadiums, Rio is also working to improve the public transportation and road systems for easy, less congested traffic, which will improve logistics throughout the city. Rio is working on adding a third metro line into the site of where most Olympic events will take place, and are constructing a Bus Rapid Transit (BRT) system with added lines and stations to quickly transport spectators from place to place. Plans for a 310 mile bullet train line connecting Sao Paulo and Rio have been delayed, and is now expected to be completed in 2019.
With stadium construction, road and transportation expansion, and the rebuilding of a water sanitation system, there is plenty of work to get through. Considering the extent of infrastructure preparation that goes into hosting world sporting events, it can be argued that a local economy would benefit from the temporary jobs that come into demand. Ideally, this extensive work will continue to pay off as it can potentially increase tourism and foreign investments. Still, it seems to be that overall, the work for the Rio Olympics have been negatively impacting the city’s economy. With too many enormous projects to juggle–after all, just the water sanitation issue is one Rio has been battling for decades–it may be that the price is too high for what a country facing economic crisis can handle.
By Amy Clark - October 19, 2015
Welcome to the first installment of Supply Chain Spotlight, Elementum’s interview series. We speak with the most influential people in today’s global supply chain. Each interview is a conversation about the most important topics and tasks facing...Read more
By Marc John Villestar - August 2, 2017
By Mary De Asis - August 8, 2018
Our notion of convenience is evolving. Being able to offer options, from product variety to flexible delivery schemes, is essential for every business. That’s probably why some of the biggest companies in the world are moving beyond retail to...Read more