Tuesday, July 2, 2013

See How Brazil’s Olympic And World Cup Dreams Turned Into A Nightmare

More than a million Brazilians flooded the streets of dozens of cities across the country, forcing major news outlets across the world turned their focus to Brazil all at once. They captured Brazilian flags being worn as capes, flying above the throngs, juxtaposed with signs and scored by music and the chanting of huge crowds. The return of international soccer’s grandest event to the World Cup’s birthplace in South America for the first time in three decades, and to Brazil for the first time in more than half a century, was supposed to look like this. But the message the world heard from Brazil was supposed to sound very, very different.

When the Confederations Cup, a World Cup tune-up tournament held the year before the main event, kicked off in June, Brazilians took to the streets. But they weren’t celebrating. They were protesting. Brazil has ascended rapidly over the last three decades — its economy is now the sixth-largest in the world — and together, the 2014 World Cup and the 2016 Summer Olympics, the first ever held in South America, were going to put the new Brazil on a world stage. The events were supposed to spark massive public investment into Brazil’s lagging infrastructure, put Rio de Janeiro, an already-popular tourist destination, on the map as one of the world’s must-visit cities, and make it clear that Brazil isn’t a country on the rise but a nation that has arrived. The influx of tourism and attention was going to flush billions of dollars into the Brazilian economy, and that money would be further reinvested into public goods.

Instead, the World Cup and Olympics have become a symbol of everything that plagues Brazil, from rampant government corruption to astounding levels of income inequality. Construction costs ballooned: Brazil’s bid for the Cup proposed spending less than $1 billion on stadiums, but updated projections say the costs will exceed $3 billion in public funds. And many of the transportation and infrastructure projects that were supposed to benefit all Brazilians have been canceled or delayed. As their government hands over massive amounts of money for stadiums, Brazilians are wondering why politicians were asking them to pay more to ride the bus, why their overcrowded hospitals and crumbling schools aren’t built to “FIFA standards” in the first place, and why the prosperity they were promised seems like such a pipe-dream now.

But this isn’t just a story about Brazil. The larger question is why Brazil sold its citizenry those dreams of economic prosperity in the first place, rather than simply getting them excited for the Confederations Cup and the World Cup on the merits of those events. It isn’t exactly a secret that events like the World Cup and Olympics come with large price tags– South Africa, Vancouver, London, and any number of cities and countries exist as evidence, and even less costly World Cups like the 1994 American version have come at a substantial cost to the host country. And yet, the prospect of local economic benefits is still a way that FIFA, international soccer’s governing body, and the International Olympic Committee try to sell prospective host cities on the virtues of bringing them to town.

“If you view it as a business where the object is to be profitable, then the answer is no [they aren't cost-efficient],” University of Michigan sports economist Stefan Szymanski said. “We should all know that from the beginning. That’s the whole reason governments are involved in this. There would be no government involvement in this if these things were privately profitable. So what they require is a massive government subsidy — a growing government subsidy.”

But the World Cup and the Olympics weren’t always sold to host cities and countries as economic stimulus packages. Host cities accepted that they came with costs, a price paid for an international infomercial promoting their cities, rather than as an opportunity for a free economic shot in the arm that would more than pay for itself. Then, in 1976, Montreal hosted the Olympics, and everything changed.

Montreal's Olympic Stadium was dubbed "The Big Owe" because of the debt it forced on the public. (Credit: AP)

Montreal’s bid estimated that the Olympics would cost the city around $300 million. When construction costs rose due to corruption, inflation, and labor disputes, the cost rose to $1.6 billion, leaving the city drowning in debt it wouldn’t retire for three decades. Montreal “was a financial disaster for the city,” College of the Holy Cross sports economist Victor Matheson said. The world and the Olympics felt the impact immediately. When the IOC put the 1984 Olympics up for auction, Los Angeles was the only city to submit a bid, and it did so on the condition that it would not undertake new construction projects to host the games.

The implication for the IOC was clear. It couldn’t, and didn’t want to, rely on the handful of cities that already had infrastructure in place to host the games. But it also had to give cities a way to convince citizens that hosting the Olympics wasn’t a guaranteed financial disaster, as it was in Montreal. At that point, it got lucky. Televisions had been in most American households for years, but now the rest of the world was catching up to the trend. As a result, television revenues that had grown slowly before the Montreal games skyrocketed immediately afterward. According to a 2002 study from Holger Preuss and the Center for Olympic Studies, global television revenues for the Montreal Olympics totaled $89 million (in 1995 $US), almost all of which came from the United States. The total stretched to $180 million in 1980 and quadrupled to $699 million by 1988. The 2000 Sydney Olympics commanded $1.1 billion in TV revenues, of which the United States accounted for roughly half. The importance of television, though, was a double-edged sword. It fed the belief that the games could be used to market the host city and country, which now had access to an even bigger audience. But it also put a larger emphasis on the image presented by host cities, since they no longer had to appeal solely to tourists coming to town but to the millions of fans watching around the globe as well. Rising TV revenues didn’t make the Olympics more costly, but the importance of TV grew the need for a prettier picture. And a prettier picture costs more money.

Montreal’s proponents had argued that hosting the games brought valuable attention to the city that would offset some of the debt through increased recognition and tourism traffic the Olympics would draw, and that at least some of the facilities were necessary long-term investments into both its city and sports culture. And so that became the argument: hosting the Olympics might cost money on the front end, but it makes good economic sense in the long-term. Tourists will spend money. The city will become more attractive. More tourists will come and spend money. Stadium construction will put people to work, and other infrastructure projects are necessary for future growth. A new justification was born because it had to be if the events were going to continue as they were.

After Montreal, proponents and organizers “said, ‘Look, we’re not getting what we want right now, we better start advertising our product a little better if we’re going to get people to do more than the bare minimum to host our events,” Matheson said. Then Los Angeles became “the low ebb for the IOC, because they said, ‘We would like a lavish games, so what do we do to persuade people?’” Szymanski said. “And so that’s where this consideration of bringing in the broader economic benefits to justify the subsidies began.”

FIFA didn’t adopt the same argument for the World Cup as quickly largely because it didn’t demand the same spending sprees until decades later. World Cups in Argentina (1978), Spain (1982), and Mexico (1986) came with little or no investment into stadiums and public infrastructure because the countries already had basic soccer structures. Even in 1994, the United States used existing stadiums to host the event, and it wasn’t until 2002, when Japan and South Korea tag-teamed to host the tournament, that stadium costs took off.

“That was absolutely insane,” Szymanski said. “They divided it by two countries, so each had half the games, but they built just as many stadiums.” Even without major domestic leagues, Japan and Korea built or renovated 19 stadiums, spending more than $4.5 billion collectively. Today, eight of the 10 stadiums Japan built or renovated for that World Cup operate at annual deficits ranging from $2 million to $6 million, and Japanese taxpayers foot the bill. South Africa, also without a major domestic league, did the same, building and renovating massive stadiums without even investing in roads or transportation options to make them accessible.

Three times the size, Cape Town Stadium replaced Green Point Stadium before the 2010 World Cup. (Credit: Government of South Africa)

Just as it did with the Olympics, television contributed to rising costs of World Cup construction, Szymanski said. “The idea that the visual image matters is not really uppermost in a pre-television era,” Szymanski said. “The primary example is the Green Point Stadium in South Africa. The original plan was to refurbish an existing stadium. But according to the story, [FIFA president] Sepp Blatter goes there on site, looks at this and says, ‘Well, it would be wonderful if we had a stadium here that was brand new and looking out over Table Mountain. The pictures would be great.’ So from a minor outlay, this turns into a major project just because Blatter said he wanted a nice TV picture. If it wasn’t for TV, we really wouldn’t care that much, right?”

South Africa ultimately tore down the 18,000-seat Green Point Stadium and replaced it with the 55,000-seat Cape Town Stadium.

FIFA and the IOC could always tailor their events to look more like Los Angeles than Montreal or South Africa. The United States and England both submitted World Cup bids (for the 2018 and 2022 versions, respectively) that involved virtually no spending on stadiums or infrastructure. But even discounting alleged corruption that sent the 2022 World Cup to Qatar instead of the U.S., the organizations won’t turn in that direction for two major reasons that run against their interests. First, they have both made it their mission to take the events to countries and continents that either haven’t hosted before or, like Brazil, haven’t hosted in decades. That isn’t a bad ideal, but it involves using cities and countries that don’t have the requisite infrastructure in place already that would allow them to avoid enormous construction costs.

Second, they view stadiums and infrastructure as valuable markers of their legacies in those countries. “It’s one thing to have a World Cup final at [London's] Wembley Stadium, which already exists, and another thing to have one at a stadium where you can put a big plaque on the wall saying this stadium was renovated thanks to the FIFA World Cup in 2014,” Szymanski said. “It’s about claiming credit. They want to build their brand, their name, and they want to take credit for everything they can. Farming it out to nations that have to spend a lot of money actually turns out to be in their interests.”

Fans and tourists are less likely to notice infrastructure investments like new schools and hospitals than they are picturesque, state-of-the-art facilities replete with all of the amenities commonly found in Western stadiums. And bigger stadiums mean more revenue from tickets, more fans buying merchandise, more money for FIFA and the IOC. Estimates say FIFA will earn more than $2 billion in tax-free revenues from the World Cup, but once these events end, FIFA and the IOC don’t have to worry about the implications of building large, often useless stadiums instead of funding goods and services that will actually help the public and the long-term economy.

That doesn’t mean countries that host these events, including Brazil, have to be wasteful. Hosting events in emerging countries like Brazil can work, according to Robert Boland, the academic chair at New York University’s Tisch Center who teaches a course on sports, tourism, and mega events. Boland argues that rapid economic growth can absorb the costs of major infrastructure investments, and also that the deadline provided by the events could speed up improvements that would normally take longer. “Because it has a deadline, it is a big event that actually has the ability to produce infrastructure and lifestyle improvement if done well,” Boland said, adding that projects that “might be debated and kicked about for 75 years versus needed public infrastructure might actually depend on the deadline.”

That hasn’t happened yet in Brazil, where many projects are lagging. But the World Cup is still a year away, and it will be three more before the Olympics come to Rio. Brazil has time, even if the clock is ticking, and Boland still thinks it could ultimately turn out as a long-term success for Brazil’s economy. If it works right, Boland said, Brazil could ultimately benefit economically from the event. Others, like Matheson, remain skeptical, even if Brazil could use improved soccer stadiums.

“They could really use the new (stadiums),” Matheson said. “But we don’t have a lot of evidence that that leads to general economic development. There’s at least the hope they won’t build a lot of white elephants, so Brazil is in a better situation than South Korea or South Africa. … But this was completely sold to Brazil as not a sporting event but as a development event that happens to be sports. Now what you see is way more money spent on sports infrastructure than they were supposed to. And so what was sold as all long-term development seems to be shifting toward, ‘Let’s get all the sports stuff done.’ So you get all the spending on the stuff that doesn’t have good long-term benefits while ignoring the whole reason the thing was sold the way it was.”

Looking past economics, Szymanski, Matheson, and Boland all agree that the mega events bring about numerous positive social effects. Szymanski’s research, included in his book Soccernomics, has found that hosting mega events leads to long-term increases in happiness for host populations. “A major sporting event can become a unifying force,” Boland said. “We can change public health, we can change public well-being, we can interact.”

“This is not a significant economic event,” Szymanski said. “It is a significant social or cultural event.”

Selling a World Cup on those grounds, however, isn’t easy, and the Brazilian protests stand as a testament to that fact. Organizers may have envisioned social cohesion among Brazil’s diverse population that took the form of Carnival-like celebrations of its soccer prowess. Instead, the World Cup hast mostly united Brazilians around issues they blame on the very people responsible for the World Cup.

Even if Brazil settles down before the World Cup-Olympics stretch begins next year, the protests have already forced changes, and they may ultimately make the rest of the world, FIFA, and the IOC acknowledge that the formula of success they’re selling doesn’t work. The events aren’t major economic revitalization projects, and they’ll need to rationalize their costs some other way. Acknowledging that reality and promoting the events for what they are — significant social and cultural events — may make them harder to justify in some instances, but it could also lead to better sporting events that aren’t propped up on a myth of prosperity. Tacking in that direction will be tough for FIFA or the IOC to do, because less costly stadiums and less lofty goals run against their interests.

But if Brazilians continue to protest, their lasting legacy may be a shift in the conversation about large-scale sporting events much like the one that took place after the Montreal Olympics nearly 40 years ago. That may be idealistic, but it hasn’t stopped proponents of better-managed sporting events from hoping.

“I think it’s a positive sign that we’re seeing these protests,” Szymanski said. “Maybe the message is starting to get through.”

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