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Rio Olympics operating budget rises by 27 percent

January 23, 2014

RIO DE JANEIRO (AP) — The operating budget for the Rio de Janeiro Olympics in 2016 was announced at 7 billion reals ($2.9 billion) by organizers on Thursday, an increase of 27 percent over the figure submitted in the 2009 bid.

The operating budget is only for organizing the games themselves, and has been delayed for months with Brazil’s three levels of government debating over who pays what.

A separate and much larger capital budget — a mix of private and public funds — will be unveiled next week and could top $11 billion. This is for building roads, subway lines and other improvements triggered by the games.

Organizers moved many costs from the operating budget to the public treasury, making comparisons to the original submission in 2009 difficult.

In addition, the Brazilian currency, the real, has fallen in value against the dollar. The real was calculated at $1 equals 2 reals in the 2009 bid document. On Thursday, $1 equaled 2.4 reals.

Organizers said inflation in Brazil from January 2009 to December 2013 was 39 percent.

“There was a negotiation process with the government,” said Leo Gryner, the chief operating officer of the organizing committee. “They signed off on our budget. ... They agreed that this is a good use of the 7 billion reals, so you are going to spend that. Everything else will be covered by us (government).”

IOC President Thomas Bach called it a “very reasonable” operating budget after meeting on Tuesday in Brasilia with President Dilma Rousseff.

“All the recent games, in the operational budget, have delivered a profit,” Bach said.

However, Andrew Zimbalist, a sports economist at Smith College in Northampton, Massachusetts, who studies the Olympics, said Bach’s use of the word “profit” was misleading.

“This (operating budget) is a small portion of the investment that gets made,” Zimbalist said. “They can talk about it all they want. More often than not there is a deficit. Sometimes it’s balanced, though it can be balanced by accounting chicanery. And a few times there have been modest surpluses. But it just doesn’t mean a heck of a lot.”

Income in the operating budget comes from the Switzerland-based International Olympic Committee, and from marketing, tickets sales and local sponsorship sales.

The size of Rio’s operating budget, in line with the budgets of recent Summer Olympic hosts, has come under increased scrutiny since demonstrations seven months ago during the Confederations Cup, the warm-up for the World Cup.

Protesters, initially upset about rising bus fares, took aim at the billions being spent on the World Cup in a country with poor schools and hospitals, and stark social inequality.

Overall spending for the Olympics is expected to be slightly more than the World Cup.

The 2009 bid document showed $700 million in subsidies from the national and local governments. That funding is out of the latest operating budget.

The IOC requires that host cities and governments cover any deficit.

A recent study by Said Business School at Oxford University of Olympic Games since 1960 showed each one has had cost overruns.

“The games overrun with 100 percent consistency,” authors Bent Flyvberg and Allison Stewart wrote. “No other type of megaproject is this consistent regarding cost overrun. Other project types are typically on budget from time to time, but not the Olympics.”

They concluded: “The data thus show that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaproject that exists, something that many cities and nations have learned to their peril.”


Stephen Wade on Twitter: http://twitter.com/StephenWadeAP

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