Rio 2016 Olympics: Another Reason to Watch Brazil’s Rise

With the 2012 London Olympics behind us, many are now looking ahead to four years from now, when Olympians will reunite in Rio de Janeiro, Brazil, for the 2016 Summer Games. One defining feature of this year’s games was the emphasis on public-private collaboration to deliver a lasting legacy for the city of London. One test of the value of the Olympics has been their capacity to bring long-term value to host cities and accelerate urban development.

From this perspective, the case of Rio de Janeiro and Brazil is a compelling case: the world’s seventh wealthiest economy, according to the World Bank, and one of the promising emerging BRICS (Brazil, Russia, India, China, South Africa) economies. This case provides an intriguing context for the Olympics, whose success hinges on an ability to appeal to the requisite wide range of funders and sponsors necessary to finance this spectacularly expensive event.

If public-private partnerships are essential to successfully carrying out the Olympics and using it to catalyze positive change for the host city, then Rio could have an important advantage. According to a report published by the Economist Intelligence Unit in 2010 (“Evaluating the environment for public-private partnerships in Latin America and the Caribbean—The 2010 Infrascope”), Brazil was ranked the second most favorable country in Latin America and the Caribbean for such partnerships.

The report evaluates 19 countries in the region against criteria on the laws, regulations, institutions and practices that shape the environment for public-private partnerships. Brazil’s environment is ranked second, after Chile. The Brazilian government is known to actively utilize public private partnerships to attract investments in infrastructure. In 2007, Brazil launched the Growth Acceleration Plan to increase investment in infrastructure; the Rio Olympics are in line with this effort.

Moreover, the 2016 Games will symbolize Brazil’s continued rapid growth. For a country long known for high and persistent inequality—especially for a middle-income country—the progress it has made in poverty reduction is particularly noteworthy. Poverty has decreased from 21 percent in 2003 to 11 percent in 2009, while extreme poverty fell from 10 percent in 2004 to 2.2 percent in 2009, according to World Bank estimates. Remarkably, in 2011, Brazil reached a 50-year low in income inequality, which has been attributed to factors such as low inflation, consistent economic growth, successful social programs and real increases in the minimum wage.

The 2016 Games will certainly draw on this momentum, and are poised to leave a lasting legacy that can continue to address critical social needs. The “Candidature File for Rio de Janeiro to Host the 2016 Olympic and Paralympic Games,” an official plan submitted to the International Olympics Committee by Brazil (during its candidacy), details plans for the 2016 Games. Stressing that Rio 2016 will strive for a “full alignment of the Games plan with long-term city objectives, optimizing the urban and social legacy opportunities,” the “Games legacy plan” is outlined in four key areas: physical transformation of the city, social inclusion initiatives, youth and education programs, and sports promotion.

Major transportation upgrading is in the works to improve the city’s connectivity for and beyond the 2016 Olympics.  More than $5 billion (U.S. dollars) is being invested to construct a High Performance Transport Ring, to be completed by 2015, with a dedicated Olympic Lane network to be used during the Games. Fifty-thousand temporary and 15,000 permanent jobs will be generated from the Olympics-related industries, not counting the construction jobs that will be created. A skills development program, carried out by the government, training institutions and universities, will train 48,000 participants in skills of strategic importance for the Games and beyond.

The City of Rio de Janeiro is using the occasion of the Olympics to launch unique social inclusion initiatives. For example, the “Alliance for Sport and Development”—in collaboration with the Inter-American Development Bank, the FC Barcelona Foundation and the National Basketball Association—seeks to integrate underprivileged children and youth in Rio through sports activities that promote conflict resolution, violence prevention, education and health. The City of Rio estimates that 140,000 members of the most vulnerable areas will benefit from this project.

The Candidature File stresses that these improvements made in preparation for the Olympics will “deliver a more connected community, creating new opportunities for employment and other benefits.” The Games will even “accelerate the implementation, and in some cases the initiation, of major sustainability projects, including those related to environmentally sensitive sites, air quality and waterways,” it argues.

To ensure that such legacy projects fully align with the wider objectives and long-term needs of the local communities and the city as a whole, the Rio 2016 Legacy Committee—a coalition of government, businesses, the Brazilian Olympic Committee, as well as community and policy groups—has been charged with oversight of all legacy projects from 2009 to 2020.

And how will this all be financed? The Rio 2016 Organizing Committee has allocated a budget of BRL 5.6 billion (approximately USD 2.8 billion at the current exchange rate), which will be funded by private organizations, with federal, state and municipal government guarantees to cover any funding shortfalls, according to the Rio 2016 official website. The cost of venue and infrastructure works, which totals BRL 23.2 billion (or USD 11.5 billion), will be the responsibility of the three government levels. Moreover, the total revenue from domestic sponsors, providers, supplier and donations is estimated to be approximately USD 618 million, according to the candidacy document.

By most standards, these figures are dauntingly expensive. Many wonder if these sporting mega-events are worth it. But as a Goldman Sachs report on the just-finished London 2012 Games, “The Olympics and Economics 2012” (July 2012) notes, the economic impact of the Games must be evaluated in terms of short-term benefits (expenditure on Olympics-related goods and services, as well as the boost to local businesses) and long-term benefits (promotion of the city to attract tourists and investors, upgrades in facilities and infrastructure of the city). Narrowly focusing on the financial performance of the Games, the report argues, “misses the wider economic impact that hosting the Olympics can have on the host nation.” Consequently, quantifying the benefits of the Olympics over the costs is not an exact science—and in any case, “It is too early to tell whether the 2012 London Olympics will make a profit or loss,” it points out.

Thus, while quantifying the bottom-line impacts of the Olympics has long been a source of debate—the benefits are often reaped incrementally over the years and some are tangible while others intangible—the fruits of the cross-sector partnerships spurred are manifested in a most spectacular way during the two weeks or so of the Games. With a fast-rising economy and an environment conducive to public-private partnerships, Brazil will provide an intriguing backdrop to this one-of-a-kind event.

David J. Maurrasse is the director of the Program on Strategic Partnerships and Innovation (http://strategicpartnerships.ei.columbia.edu/) at the Earth Institute. He is the president and founder of Marga Inc., a consulting firm providing advice and research to strengthen philanthropy and innovative cross-sector partnerships to address some of today’s most pressing social concerns. His book, “Strategic Public Private Partnerships: Innovation and Development,” is due out in fall 2012.