Olympics: Which will it be, Chicago, Madrid, Rio de Janeiro or Tokyo? The grandees of the International Olympic Committee will announce the location of the 2016 Olympics on Friday evening. But in this contest, the chosen city could be the real loser.
The benefits to hosting the event are obvious: long-term job creation, investment opportunities in housing and infrastructure, a boost to tourism and a facelift for city and country. But investments of this size can create distortions and rarely pay off. The price of a few weeks of Olympic glory is high indeed.
Just look at Athens. Greece spent around euro 9 billion “bringing the games back home” in 2004. That’s about 4 per cent of GDP, money that could have been put to better use later. In the midst of recession, politicians are bickering about whether the country can afford a euro 10 billion stimulus package.
True, the new Athenian transportation system is more than welcome, as will be the regeneration of east London after its Olympics in 2012. But the Greek capital now has more stadiums than it can use, unless mouldy pools and spider webs count as use. The Greek experience is more the norm than the exception. Olympic Games have often lost money and left cities with the wrong sorts of infrastructure.
That said, careful management can keep the cost of the Olympic spirit reasonable – even in times of financial stress. The 2016 contestants are making an effort, although the past record suggests that the spirit of parsimony in the bidding usually yields to something more like profligacy by the end of the closing ceremony.
Chicago, in true American fashion, promises to finance the games through the private sector alone. Madrid boasts that close to 80 per cent of its venues are ready or under construction – putting a floor under its expenses. And Tokyo says its investment on environmentally friendly structures will reap dividends in the future.
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Rio is doing something different – its $14.4 billion bid overshadows the rest. But it probably also makes the most economic sense, even if the required public investment in transport and policing will add to that base cost significantly.
Brazil is a developing market, a commodity exporter which has done well in the recession and the country’s debt has recently been upgraded to investment grade. The Olympics would only cost 1 per cent of GDP.
And Rio is a fast growing city with a tourist infrastructure that could do with an Olympic upgrade. The city needs the Olympics more than the other candidates. It would also be able to absorb the investment without flinching.