The Olympic Games Left Rio in Debt. Should the IOC Have Helped?

By Scott Salmon

RIO DE JANEIRO, BRAZIL – Ten years have passed since the heady moment when Rio de Janeiro was awarded the 2016 Summer Olympic Games but, while the euphoria that news generated has long since dissipated, the fiscal hangover is very much still with us. Just because the Games are long over doesn’t mean we’re done with Rio 2016.

It’s easy to forget the giddy optimism of the early Lula years, buoyed as they were by the discovery of massive oil reserves and a global commodities boom, a fleeting moment when Brazil seemed, once again, to be “the country of the future”.

As Rio launched its ambitious bid to be the first South American host, few predicted the morass of national recession, political scandal, corruption – and debt – that would eventually overrun the city’s Olympic legacy.

Nearly three years later, many companies who supplied goods and services to Rio 2016 still haven’t been paid. As a result, the local organizing committee faces nearly 600 lawsuits. Indeed, the mere fact that the Rio organizing committee still exists, with a full-time staff of seven, years after it should have been dissolved, is a testimony to its indebtedness and ongoing legal troubles.

On top of this, we now learn the debt incurred by the local organizing committee has more than tripled since the Games ended – ballooning from an initial R$144 million (US$32 million) at their close to the current figure of R$420 million (US$113 million).

It seems almost inevitable that Rio’s tax-payers will ultimately pay this price. But how did we get here – and where could we turn?

Even before hosting rights were awarded, Rio invested millions planning, submitting – and selling – its bid to the International Olympic Committee (IOC). This crucial stage in the process was subsequently tainted by corruption – allegedly the Chair of the Brazilian Olympic committee brokered US$2 million in vote-buying bribes to ensure Rio’s victory.

Once awarded, the IOC contracted the local organizing committee to steer the Games to their conclusion.

While the label “austerity games” was never accurate, as Rio’s changed economic circumstances became apparent, local organizers made a genuine attempt to stage a fiscally responsible event.

But the divergence between the concerns of global brand and local reality generated continuous tension within the scales of Olympic governance, with the IOC insisting on burdensome specifications and lavish outlay.

The resulting debt lingers. Rio’s organizing committee appealed to (new) federal, state, and city administrations for help but, as Brazil’s recession deepened, they were rebuffed by all.

A request to the IOC for assistance ultimately elicited only a statement declaring it had “closed all its obligations with the [Rio] organizing committee.”

During the 2013-16 cycle, the IOC received revenue of US$5.6 billion, largely from selling TV rights to the Rio Games.

And, as we write, their opulent new headquarters in Lausanne is near completion. A signature of the glass-walled building – described by Interior Design, with inadvertent irony, as “fully transparent” – is a grand circular staircase, linking the building’s five stories in homage to founder Pierre de Coubertin’s trademarked Olympic rings.

In contrast to the sporting events it administers, the IOC headquarters were delivered under budget – by around US$55 million. By comparison, Rio 2016’s initial debt to suppliers (before interest, fees and legal costs) was approximately US$32 million. In other words, regardless of whether their administrators really need to work in a modernist masterpiece, the IOC could have offered Rio 2016 a debt relief package without compromising its new edifice.

That the administrators of the Olympic movement felt the need for a flagship administration building, funded by proceeds from the Games themselves, is slightly surprising. That they chose to locate in tax-free Switzerland, with its culture of financial impenetrability and banking secrecy, is not.

What remains an open question is whether the IOC had a responsibility to come to Rio’s aid. It’s a question that will ultimately be decided by how many other cities are willing to undertake the outlay that the Summer Olympics represents.