17 February 2016

Privatisation is the New Black (until it´s red)

Originally posted at The Allrounder on 18 January 2016
For a city that has contorted itself repeatedly over the last decade to host major sports events, Rio de Janeiro can’t seem to get its stadiums quite right.
Last week, the consortium that won the contract (under dubious circumstances) to manage the Maracanã stadium for 35 years fired three quarters of its workforce. The official reason is that the consortium, involving Brazilian construction giant Odebrecht and global sports management empire IMG, is “anticipating handing the stadium over to the IOC in preparation for the Olympics.” The real reason is that the stadium isn’t making enough money.
Another stadium, formally called the Estádio Olimpico João Havelange (after the disgraced former FIFA president and IOC member) and more commonly known as Stadium Rio or Engenhão, had its electricity cut off last week. This will be Rio’s venue for track and field during the Olympics, but right now the concession rights holder, Botafogo Futebol e Regatas, can’t pay the bills. Built for the 2007 Pan American Games, for ten times over budget, the stadium was closed in 2013 because the roof was about to cave in. Other Olympic stadiums, like the National Tennis Center and National Equestrian Center, are incomplete and without a contractor to finish them.
The privatisation of publicly financed stadiums is not a Brazilian innovation, but what is happening in Rio demonstrates the basic logic and typical consequences of the mega-event business model. Cities sign host-agreement contracts with international rights holders like the IOC or FIFA and are solely responsible for delivering infrastructure. Back in 2009, the Rio state government tried to arrange a public-private partnership to finance the R$1.2 billion renovation of the Maracanã. Unsurprisingly, no private company dared take on the task because stadiums are not inherently profitable ventures. Twenty-first century FIFA stadiums are expensive to maintain and depend on big crowds to balance budgets. But Brazilian football crowds are small, and there isn’t a North American-style consumer economy at stadiums that makes money for concessionaires.
So the private sector stayed away at the start, knowing that the state was on the hook for delivering World Cup and Olympic infrastructure and that construction and concessions contracts would be available later. In their absence, the State of Rio de Janeiro was forced to pay for another round of deforms to the Maracanã, following major renovations in 2005-06, that cost upwards of R$1.2 billion. The new architectural configuration of the Maracanã did not necessarily require its removal from the public domain, but the demands that the mega-event business model puts upon sports venues drive the privatization process forward. Because the stadium has all of the FIFA bells and whistles, the state lacked the technical and financial capacity to manage and maintain it, ensuring that only a specialised company with the know-how to run it could do so. Thus, the destruction and construction project justified privatisation. Now that the winner of the rigged privatization process, Maracanã S.A., can’t make ends meet, they are walking away from the contract, and the state must find a way to make Rio’s iconic stadium viable. Inevitably, the government will try to privatise it again, instead of looking for maximum public benefit.
Critical to understanding what is going on with Rio’s stadiums is the role of the 2013-14 protests and the on-going actions of civil society actors like the Comitê Popular da Copa e das Olimpiadas. Back when the Maracanã was being reconstructed for the World Cup (2010-2013), the Comitê Popular joined forces with a number of other groups to prevent the demolition of four sites adjacent to the stadium: two athletics facilities, a public school, and the former home of Brazil’s Museum of the Indian. These were long, hard battles with a lot of tear gas, legal actions, and dedicated resistance. All four of these installations are still standing. However, the Maracanã S.A. consortium claims that when the former governor ceded to public pressure over the four sites, he unilaterally changed the terms of the concession contract. Without the area around the Maracanã available for shopping malls and parking lots, the consortium insists that it cannot be bound to the contract. In essence, this was a real-estate deal that had a World Cup stadium on site. But with average attendance at Brazilian league matches below that of MLS, the stadium itself doesn’t make enough money for the company. Since there is no space for shopping, Maracanã S.A. now wants to give the stadium back.
When you turn on your tv later this year to watch the opening ceremonies of the Rio Olympics, this is the stadium you’ll be seeing.
All of this is happening in the midst of Brazil’s biggest economic and political crisis in decades. Many of the companies contracted to build venues for the World Cup and Olympics are under investigation by Brazil’s Federal Police for their involvement in a corruption scandal of magnificent proportions. The back-room cronyism and old-school coronelismo of Brazilian politics are alive and well in the sporting world: João Havelange (still kicking at age 99), Ricardo Texeira, J. Hawila, Jose Maria Marin, and Marco Polo del Nero are the Brazilians at the epicentre of the unfolding FIFA scandal. For the first time in modern history, one person – Carlos Arthur Nuzman – holds the positions of both president of the host country’s Olympic Committee and president of the upcoming games’ organizing committee. The mayor of Rio, Eduardo Paes, has come under intense scrutiny for the largest program of forced removals in the city’s history. The most visible of these removals is happening in a community called the Vila Autódromo, on the construction site of the Olympic Park. Across the city as a whole, the Comitê Popular estimates that more than 22,000 people have been forcibly removed from their homes during Rio’s mega-event cycle. The IOC evaluation commission always tells the international media that “all our questions have been answered,” without ever saying what those questions are. Once the Games have moved on, there will be giant sucking sounds from the vacuums of responsibility left behind.
As with the interminable shenanigans of NFL teams hopping between cities in search of the highest bidder, the World Cup and Olympic Games are monopolistic, institutionalized transfer-of-wealth programs that leave shiny new stadiums and massive debt servicing in their wake. However, it is not just the Swiss-based sports organizations that are raking in the billions. These events are ideal opportunities to transfer wealth from the public to private hands in local contexts, with the privatisation of stadiums only one of many instruments at the disposal of event coalitions. With 200 days until the 2016 Summer Games, Rio’s public, once again, has been exposed to financial, environmental, housing, and other risks by the very politicians who were supposed to be acting in their interests.
As the “legacy” projects fail one by one to materialize, the Rio government is no longer claiming that the Olympics are going to bring lasting economic benefits to the city. Instead, what Mayor Paes says is that the recent cuts to Olympic spending are a sign of fiscal responsibility – the equivalent of spending a year’s salary in a weekend shopping binge and then deciding that the rhinestone boots were a bit much. To be sure, the massive public outlays have brought some cosmetic improvements to the city, but the legacies of the 2007 Pan American Games and 2014 World Cup have been negative. Rio’s public coffers have been used as an ATM for a small group of closely articulated political and economic interests. When the promised profits aren’t sufficient, as Maracanã S.A. discovered, there is no risk in walking away in false indignation.

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