Business World

Thursday 14 December 2017

Yet another Olympic-scale construction nightmare as Rio struggles with hurdles

A building worker walks at the site of the Carioca Arena in Rio
A building worker walks at the site of the Carioca Arena in Rio

Stephen Eisenhammer

With fewer than 500 days until Rio de Janeiro hosts the Olympic Games, construction of several venues has not started and some major contracts have not even been tendered, setting the stage for a last-minute rush that will likely drive up costs.

It may seem like a familiar script for big sporting events. As the start date nears, the headlines focus on delays and the scramble to get ready on time, but the games do go ahead.

Rio 2016 may, though, end up being one of global sport's closest calls yet, resulting in a race against time that would inevitably inflate the current 40-billion-real (€12bn) price tag and add to the burden on Brazil's struggling economy.

At around this stage in the run-up to the 2012 London Olympics, almost 80pc of venues and infrastructure had been completed. In Rio, only about 10pc of 56 construction, overlay and energy projects are finished.

While the latter figure excludes 11 existing stadiums that need no renovation, the figures highlight a gulf in preparations that could put Rio in the same league as Athens in 2004, where only half of the venues were ready with five months to go.

Worryingly for Rio, a quarter of projects have still not started and don't even have fixed timeframes or cost estimates.

"There's still a lot to be done," said Michael Payne, who worked at the International Olympic Committee (IOC) for over 20 years and helped Rio put together its bid, adding that a scramble was probably inevitable. Any cost rise will be hard to stomach for a country hit by an economic slump and austerity. Public anger over issues including the inflated costs for World Cup stadiums brought over a million people on to the streets in 2013.

A corruption scandal at state-run oil company Petrobras, which has implicated several construction firms delivering Olympic projects, adds to the risk of delays.

So far, companies and the government say the scandal will have no effect, but a number of smaller engineering firms have gone bankrupt as a result. Curtailed access to credit markets means cash flow could become a major headache for builders.

The government, as with all Olympic hosts, has guaranteed to finance any cost overruns.

Costs tend to surge during a last-minute scramble as contractors can demand higher prices.

For Athens, the final push, with three shifts being worked at every venue, meant the initial budget doubled to $11bn. Brazil could better absorb an expanded bill. The estimated total budget, even with infrastructure projects like a subway extension and port regeneration, is 0.5pc of GDP. In Greece, the final cost was nearly 5pc of GDP that year.

Brazilian officials say comparisons with other Olympics are misleading. They point to Brazil's hosting of the World Cup last year when, despite stadiums being handed over later than ever, the event was a success.

"London and Rio are very different. The laws are different, the processes are different. We are a developing country and we have our own characteristics," said Marcelo Pedroso, acting head of the Public Olympic Authority. "I'm relaxed about saying that there is no problem with where we are in our preparations." (Bloomberg)

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business