In the Spotlight: Are Brazil’s world class events a catalyst for growth or misallocated public spending?

Carolina Cardenas – Brazil Institute, 07/19/2013

Maracana

Ever since Brazil achieved macroeconomic stability with the implementation of the Plano Real in 1994, the country has come a long way, surpassing the UK to become the 6th largest economy in 2012. Sound economic policy coupled with a recent commodities boom allowed for decreasing poverty levels, rising purchasing power, and an addition of forty million Brazilians to the country’s middle class.  Along with economic growth has come a strong desire for international recognition. As one of the four original “emerging markets,” coined BRICs, Brazil has sought to expand its presence in international organizations. This can be seen in the country’s ongoing request for a permanent seat on the United Nations Security Council and the appointment of Roberto Azevedo as director general of the World Trade Organization in 2013.  This global growing emergence has also translated into a growing tide of hosting world class events.  In an attempt to further elevate Brazil’s world status, the country will be hosting the 2014 FIFA World Cup and the 2016 Olympic Games.

In addition to international expansion, there is a second trend that has emerged as a result of Brazil’s economic growth. Widespread protests that have taken over the country’s streets since mid-June are representative of a Brazilian society that is demanding more from its government. Brazil’s expanding middle class has become more educated and further exposed to examples of transparency and ‘democracy with equity” worldwide, setting this benchmark for itself. Citizens are demanding better public services, infrastructure, education, health care and a change in the framework of Brazil’s democratic system. The government’s decision to host the World Cup followed by the summer Olympics has propelled Brazilian civil society to initiate a necessary debate on public spending priorities.

There are two phenomena taking place concurrently: Brazil’s desire to emerge globally and the citizens’ desire for better public services domestically. Although many consider these to be conflicting, hosting mega events at a time of pressing social need presents an incredible opportunity for boosting development. If used positively, the World Cup and Olympic Games could accelerate investment in infrastructure and improve services to meet international standards. However, perceptions of protesters at the moment are that, “the quality of urban life worsened as precedence was given to internationally prestigious events that ended up absorbing the investments that were supposed to improve transparency, education, and public services in general.”

The question to bear in mind is how the World Cup in 2014 and the Olympic Games, two years later, will impact Brazilian society. According to Pedro Trengrouse, consultant for the UN on the 2014 World Cup and project coordinator at the Getulio Vargas Foundation, in terms of infrastructure, these mega events are intended to allocate a portion of their budget to improving airports, urban transport, security, tourism, health and telecommunications. In preparations for the Olympic Games, the government of the state of Rio de Janeiro proposed a redevelopment of the city’s transportation system. The proposal includes the expansion of new metro lines, acquisition of rail cars, revamping stations to make them more accessible for handicapped passengers, introducing a railway system and modernizing ferry transportation. The city also plans to introduce new technologies such as cable cars for mass transit and a Bus Rapid Transit (BRT) system, the latter which started to circulate on an experimental basis on June 6, 2012.  In Rio de Janeiro’s official candidature for the 2016 summer Olympics, the Brazilian Olympic Committee in partnership with the federal government and the state government emphasized a commitment for developing infrastructure in four primary locations, Barra da Tijuca, Deodoro, Maracana and Copacabana.  The Rio 2016 plan focuses on urban renewal in key areas surrounding game facilities, including the Port area, which has recently undergone major redevelopment. In addition, many of the villages to be constructed will provide new residential apartments after the conclusion of the games (more than 24,000 rooms.)  In a 2010 government press release, Orlando Silva Jr, Brazil’s Minister of Sports at the time, stated that the government would be investing US$18.7 billion in infrastructure in preparation for the 2014 World Cup, allocated to over fifty projects in the twelve designated host cities. Silva emphasized that seventy eight percent of the funding would come from the public sector, with the remainder being allocated by the private sector. He ensured that “we are focusing on sustainable development, which will not only result in Brazil successfully hosting the 2014 matches, but also improve the country for the Brazilian people.” These various proposals aimed at using mega events as a catalyst have convinced many that this strategy is the best way of forcing the government to tackle much needed infrastructure projects.

Others would argue that it is very unlikely that these proposals and projects be implemented successfully. In 2007, when Rio hosted the Pan American Games, new subways lines and the clean- up of the polluted Guanabara Bay were proposed, but neither was accomplished. Those who are more critical of the way in which the country has been preparing for these events bring up issues such as quality control and forced displacement. In late June, a friendly match between Brazil and England was cancelled because the Maracana stadium was ruled unsafe for play (the decision was later overturned).  On the topic of displacement, Eduardo Paes, mayor of Rio de Janeiro, stated in an interview with a BBC reporter, that no communities were removed or marginalized with the exception of those whose homes were located where the Olympic Park is being constructed.

On the economic front, preparations for both sporting events have generated controversy in terms of public spending. It is estimated that the World Cup will cost approximately $13.3 billion, $3 billion of which have been designated for new and upgraded stadiums, and the Olympic Games are to cost $18 billion in total. Although the Local Organizing Committee of the Olympic Games claims that all cities to have hosted the Olympics since 1984 have recovered costs, an Oxford University publication states that “every Olympics since 1960 has gone over budget.” According to Pedro Trengrouse, public investments in the construction of stadiums for the World Cup only represent 40 percent of the total financing. Much of the funding comes from the Brazilian Development Bank (BNDES) as well as other private investors. Additionally, he explains that soccer in Brazil currently generates R$11 billion reais per year, creating 370,000 jobs. The modernization of stadiums could potentially increase these numbers to $62 billion per year and two million jobs.  This significant portion of federal money being allocated to assist preparation for the 2014 World Cup and 2016 Olympics has concerned Brazilian society given the fact that the economy has become stagnant and the people are demanding better services.

These world class events will undoubtedly leave a legacy for Brazil. The International Olympic Committee says it takes at least a decade to measure the impact on society properly. The World Cup and Olympic Games can bring substantial positive changes for Brazil, but only if managed correctly and effectively. Eduardo Paes believes that Brazil has lost a great opportunity with the World Cup because “FIFA just asked for the stadiums, and that is all Brazil is delivering.” Leveraging these events can undoubtedly bring about enduring change, as was the case of Barcelona in 1992, which went from being an old industrial town to a world class city. When protesters throughout Brazilian streets hold up signs that say, “The World Cup for whom?’ (A Copa pra quem?), they are emphasizing and demanding that the government follow through with its promise to improve the country not only for the games, but also for the Brazilian people. As put by Eduardo Paes in a Huffington Post article, “the voices of the streets represent a unifying message – these events must prioritize legacy and what will remain after the race is run and the final whistle blows.”[i]

Carolina Cardenas is the Staff Intern for the Brazil Institute at the Woodrow Wilson International Center for Scholars.

Photo courtesy of Flickr user Rodrigo_Soldon

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