A Legacy of Crisis: Rio After the Olympics

Brazil's big bet on the 2016 Rio Olympics has gone bust, and the country has been plunged further into political and economic crisis.

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Dec 28 2016, 7:56pm

Erich Schlegel-USA TODAY Sports

In Rio during the Olympics, I spent a day with Hugo Costa, a geographer who lives in the city's working class North Zone, to talk about the Games' legacy. He showed me how a new bus system touted as a lasting civic benefit was actually making things worse for him and his family, how it didn't alleviate any of their transportation problems, and how it destroyed the neighborhood's last green space. In other words, it was just another false promise to the people of Rio, one of many made by the Olympics. But Costa was still a proud citizen, trying to make his city a better place.

Earlier this month, I messaged Costa on WhatsApp to check in. How were things going?

"Well," Costa messaged back, "The news about Brazil isn't good."

Read More: The Rio Games Were An Unjustifiable Human Disaster, And So Are The Olympics

After the worldwide media's Eye of Sauron-like gaze on the Olympics shifted elsewhere, Brazil plunged further into political and economic crisis. Since 2014, unemployment has doubled and GDP has fallen 8.4 percent. Following former president Dilma Rousseff's impeachment, the new right-wing Brazilian government passed a draconian austerity measure that will freeze spending for 20 years and cut wages and pensions of government employees up to 30 percent, a law that the United Nations decried as unprecedented and "lacking in all nuance and compassion." (This, of course, in a country that still has no dividend or corporate income tax.)

Of all the places in Brazil, Rio has been hit hardest. The state of Rio—as well as the city itself—was broke before the Games began. Rio's revenue greatly relies on the price of oil, thanks to reserves tapped in the late 2000s. When global oil prices plummeted, Rio's cash flow dried up, and so did that of the biggest company in Brazil, Petrobras, the federally-owned oil company that has its headquarters and many refineries and factories in Rio. Federal bailout funds that kept Rio functioning for the Olympics are long gone, and, thanks to tax breaks given out to sponsors and other Olympics-adjacent companies, the state failed to raise any revenue from the three-week festivities. Today, the state owes some $31 billion to various creditors, including the federal government.

Petrobras is also at the center of a massive corruption scandal dubbed Lava Jato, "car wash," which involves more than $2 billion in bribes and kickbacks, some of which relates to the Olympics. Brazil's largest construction company, Odebrecht, is also central to Lava Jato. It oversaw more than half of the Olympics' building contracts and had its own bribery department to handle such affairs.

As part of cooperating with authorities in the investigation, Odebrecht has directly implicated the outgoing mayor of Rio, Eduardo Paes, one of the Olympics' biggest boosters. Company executives claim to have given Paes as much as $8.95 million towards his 2012 reelection campaign. Earlier this month, Paes' assets were frozen due to some irregularities relating to the Olympic Golf Course's environmental taxes—the development company FIORE was supposed to pay roughly $470,000 in taxes, but didn't, which in turn passed the cost on to the city. Paes' assets were frozen since he was planning to move to America for a Columbia University teaching gig, but Paes subsequently announced he will no longer be teaching there. The Olympics Golf Course kerfuffle is hardly surprising given everything I learned about the course in August, and how Paes and the city orchestrated its construction on environmentally-protected land for the benefit of FIORE's billionaire owner.

Outgoing Rio mayor Eduardo Paes (left) enjoying a happier, less investigatory era. Photo by Michael Madrid-USA TODAY Sports

So far, the Olympic "legacy" projects don't look too promising either. Odebrecht also "won" the bidding for legacy projects such as the BRT lines that run through Costa's neighborhood. One of the uncompleted works, the Transbrasil line—which nonsensically shadows existing highway and rail lines from downtown up through the north zone—has ceased construction altogether thanks to the corruption scandal.

The new metro line built for the Olympics, which connects wealthier areas of the south zone with the rest of the metro system, remains prohibitively expensive for many Cariocas and doesn't have a transfer fare plan with city buses and the existing BRT lines. To wit: a journey including bus and the metro—a necessity for most since the metro isn't exactly expansive—now costs 7.90 Reais, an expensive proposition for Rio's working class. At first, the state and bus companies agreed to a 90 cent discount, which would be reimbursed to the bus companies by tax revenues from the state, but the bus companies are now refusing to honor the discount because the government is broke and doesn't have the money to pay them back. Also, all three systems—bus, BRT, and metro—require three different passes. This lack of integration with the bus lines has contributed to the new metro line's ridership falling way short of expectations; only 80,000 passengers a day compared to a projected 300,000.

The other Olympics legacy rail project, the light rail (or VLT) in downtown Rio, is not a total white elephant. The line connects the main bus terminal with the domestic airport—which used to have no real public transportation link—and the new port region, which itself saw a revitalization thanks to an Olympics legacy project (Rio's Olympic Committee long wanted to include the port region in the Olympics, but because it wasn't part of the official bid, the IOC refused). However, the VLT was supposed to be a whole network of lines throughout downtown, a plan for which there is now no money.

The VLT is operated via a public-private partnership, which includes, among other companies, Odebrecht. A thorough audit of the partnership agreement showed the city of Rio is on the hook for R$1.6 billion to the private companies making up the VLT consortium for the next 25 years, in addition to making up any revenue shortfalls the VLT may experience over that time—likely a substantial figure, considering only a small portion of the network is built). Essentially, the city, which is flat broke, has guaranteed the VLT consortium profits for the next two and a half decades for a largely incomplete project.

Meanwhile, RioOnWatch.org has reported that the half-finished construction of some of those VLT lines has destroyed local economies in some working class neighborhoods, since foot and car traffic now circumvent their neighborhoods to avoid the torn-up streets. Rio On Watch estimated that 28 bus lines from the port region to the North and South Zones were cut and 21 lines shortened for the VLT construction. In Gamboa, a neighborhood just north of downtown, five lines were cut, and some of the only lines that remain cease operation at 7 PM. One resident summed up the VLT's impact to Rio On Watch by saying, "It only got better for tourists, but for those who live here it is a horror."

One of the most high profile legacy projects, the cleaning of Guanabara Bay, also seems poised for historic failure. Not only did it fail to clean the bay for Olympic sailing events, but earlier this month, the company responsible for the continued cleaning of the bay fired the workers on the project.

As for the Olympics venues themselves, they're still there, and that wasn't the plan. As of the end of November, the main Olympic Park has been empty, with debris still strewn about as if the park was abandoned, clearly not ready to host more events any time soon. The plans to re-purpose several of the temporary stadiums as schools around the city have not been put into action. Given Rio's financial realities, it's difficult to see those plans coming to fruition.

As for the golf course, which was both a venue and a legacy project since the course was to remain open to the public for 20 years, an AFP report from November said funding is already a problem and the course goes largely unused, thanks in part to the hefty minimum play fee of $74 and the fact that golf isn't popular in Brazil. By early next year, the course's future may be in question due to missed payments from the Brazilian Golf Federation.

Like Brazil, Rio's Olympic golf course faces an uncertain future. Photo by Rob Schumacher-USA TODAY Sports

Faced with a laundry list of stalled projects, white elephants, and legacies that are anything but, cariocas have voiced their displeasure at the polls. As Mauricio Santoro, professor of political science at Rio de Janeiro State University told me, the three politicians most closely associated with the Olympics—Rio mayor Paes, Rio state governor Sérgio Cabral, and the former president of Brazil, Rousseff—are all facing corruption charges and are no longer in office. Cabral has been arrested, Dilma was impeached, and Paes looks like the next politician to have his career stonewalled by Lava Jato.

Meanwhile, Paes's chosen candidate to replace him lost to Marcelo Crivella, a conservative Evangelical pastor—who Santoro characterized as "conservative even for the Bible Belt of the United States"—a sharp contrast with Rio's liberal, free-wheeling image.

It's easy to forget that Rio's image was the point of all this in the first place. Rio—and Brazil as a whole—spent a decade preparing to host the world's two premier mega-events, the Olympics and the 2014 World Cup, in an effort to symbolize its ascendancy to global economic relevance. It was a fair enough bet at the time, and one Brazil easily could have managed if conditions held. Only they didn't, and the rest is not merely history. Brazilians, and especially cariocas, will be feeling the effects for decades.

But how much of the blame belongs at the feet of the Olympics and World Cup is not an easy calculus to make. The perception, Santoro said, is that Brazil overspent on two massive parties for the world to enjoy and are now paying the price. But that's not the whole story. Brazil also hit some terrible luck. Everything possible went wrong and the government didn't react well, choosing to give tax exemptions to big corporations and ease lines of credit when oil revenues decreased, hoping to spend the country's way out of the problem. Everyone piled up debt, including everyday consumers and government employees, many of whom lost their jobs when the government went bankrupt or Petrobras laid off thousands when the scandal hit. The mega-events didn't help, of course, but they didn't write the check. They merely added a few more billions to the bill.

Olympic Stadium construction isn't cheap. Photo by Michael Madrid-USA TODAY Sports

This isn't to say Brazil or Rio's power structure are blameless—far from it—or that there's nothing here for other prospective mega-event hosts to learn. Particularly for other emerging or developing nations, Brazil's last two years offer a profound cautionary tale for how quickly economic and political winds can change and how far into the future bets should be placed. It's easy to forget now, but when Brazil won the Olympics bid in 2009, it was ready to surpass France and the UK as the world's fifth-biggest economy. Now, it has a president nobody elected, a government spending plan condemned by the UN as unhumanitarian, the world's biggest active corruption scandal, and bills nobody knows how to pay.

Santoro posited that perhaps the lesson extends beyond emerging economies: "Come on, in the world that we're living in now, who has strong political institutions, right?" Which country, he asked, would you make a ten-year bet on right now?

"I think the crisis was coming with or without the Olympics," Santoro said, "but the fact that we hosted the World Cup two years ago and the Olympics this year—" he paused to chuckle a bit to himself "—it's funny, because it is like the Olympics were many years ago. Because we are living now in such a different mood in Rio. It's like something from the deep past."

The closing ceremony was four months ago last week.

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