The 2016 Olympic games are scheduled to be held in Rio de Janeiro, Brazil in just under a year from now. However, as we draw closer to their scheduled date, more and more red flags are fluttering, suggesting that Brazil will not be capable of being a good host.
Brazil is facing a complete crisis of confidence. The embattled socialist government there has seen its leader, Dilma Rousseff, fall to a pathetic 8% approval rating nowadays. 250,000 protesters turned out in a recent demonstration demanding that she resign.
The most recent problems have stemmed from a corruption ring named Operation Carwash that involved many members of both the country’s government and its crown jewel asset, the state-run oil company Petrobras (PBR).
The effect on the government has been dismal, it appears unlikely to survive much longer in power. And Petrobras has also taken a beating. Shares, which traded above 50 back during the good times, still lingered at $10 earlier this spring.
Now they trade in the low 4s, down 60% in just a few months. The company’s bonds have been downgraded to junk status. And the company’s CDS spread has launched skyward, now reaching levels far above where it hit during the worst of the 2008 financial crisis.
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Last year, speculation mounted that the 2016 games would be moved back to London. At that point, preparations were only 10% complete, far behind even where woefully-unprepared Athens had been in 2004.
One high-ranking Olympic committee member described Rio’s preparations as: “The worst I’ve experienced. We have become very concerned. They are not ready in many, many ways.” Though, he said, “We have to make it happen and that is the IOC approach. You can’t walk away from this. It is unprecedented for the IOC but there is no Plan B. We are going to Rio.”
At this point, a year later, it may be time to start preparing that Plan B. It’s said that London still has many facilities ready that could be utilized if necessary for a second round of the Olympics there in 2016.
Brazil’s preparations continue to underwhelm. They’ve just announced that their opening ceremony will feature a miniscule budget, a paltry 10% of what London spent for the 2012 Opening Ceremonies. Sure London spent a lot on their show, but still, is a 90% budget cut appropriate?
Instead, Brazil has said that it will celebrate its culture rather than spending money on a high-tech performance. If nothing else, Brazil is proving its no China as far as emerging markets go; this opening ceremony won’t hold a candle to Beijing 2008.
And remember that a quarter million protestors that turned out for a recent protest demanding the resignation of the country’s corrupt president. Should this attitude of civil unrest continue into next year, foreign dignitaries may get to witness a very cultural scene indeed should the games be held in Rio.
Brazil has downgraded the planned size of the main swimming stadium due to budget cuts, removing thousands of seats for spectators and members of the media. The international swimming body is furious.
And that’s not the only problem in the aquatic department. Thousands of dead fish carcasses washed up in front of Olympic Park in Rio recently. It turns out that the AP ran an investigation and found greatly excessive levels of human sewage in all the beach staging areas where the Olympic events are to be held. The Brazilians, who had been claiming there was no problem, have now promised to do viral tests.
In addition, there are plenty of infrastructure problems as well. Namely, the extension of the subway line out to the main Olympic area is not complete and behind schedule. If it isn’t completed on time there would be gargantuan traffic delays during the games. There is only one main road between the main city center and the Olympic area, and this road already suffers from heavy traffic.
In addition, there’s a shortage of hotels. This has forced the Olympic Committee to make a partnership with Airbnb to try to offload much of the demand for athlete housing onto private houses and apartments. The lack of housing is turning into a burden for smaller National Olympic Committees that have to find housing for their athletes.
In all, it’s unclear whether Rio will be able to get its act together in time for a solid Brazilian Olympic games. There are many problems just on the infrastructure side.
Add in that Brazil is rapidly spiraling toward bankruptcy and that the country’s government has lost 92% of the country’s support, and it’s uncertain if Brazil will even have a stable government and functioning economy by the time the Olympics roll around. It’s time to think about a Plan B.
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