Sporting political and economic risk kicks off this week

A man works in Rio de Janeiro during a February awareness and prevention campaign against the mosquito Aedes aegypti, the transmitter of Zika virus. (Luiz Souza)

A man works in Rio de Janeiro during a February awareness and prevention campaign against the mosquito Aedes aegypti, the transmitter of Zika virus. (Luiz Souza)

COMMENT

This Friday sees the kick-off of the European soccer championships, the world’s third-biggest sporting event, followed closely by the opening of the Rio Olympics in August. Although hosting such major contests still commands national prestige, both events have been plagued by political and wider risks and controversies underlining the potentially huge challenges associated with such tournaments, not least given the operating costs associated with running them and maintaining security.

Take the European football championships (Euro 2016), awarded to France to great fanfare in 2010 by Uefa, but which now take place in a country operating under an official state of emergency following the terror attacks in Paris last year. Only last month, the United States’s state department issued a warning that the event could be a target for further atrocities, only the third time in 20 years that such cautionary advice has been issued by the US government for European travel. French authorities are deploying 90?000 police, soldiers and security guards for Euro 2016.

The Olympics in Brazil offer an even starker example of the political and wider risks of hosting major sporting events. When Rio won in 2009 the right to host the games, the national economy was booming and the country was enjoying significantly enhanced international prestige as a leading emerging market within the Brics (Brazil, Russia, India, China, South Africa) group of nations.

Today, Brazil is mired in political crisis over the impeachment of President Dilma Roussef, and the worst recession in decades, which has forced significant spending cuts to the Olympic budget. Further, more than 100 prominent doctors and professors last month wrote an open letter to the World Health Organisation asking for the games to be postponed or moved from Brazil “in the name of public health” in light of the Zika outbreak.

Zika is the worst health crisis facing Brazil since at least 1918, according to the Oswaldo Cruz Foundation, a leading health research institution based in Rio. The country’s health ministry estimates that up to 1.5-million Brazilians may have been infected. A major concern is that researchers suspect the Zika virus can cause microcephaly, a birth defect in which babies develop abnormally small heads and other neurological problems.

The problems afflicting both sporting contests underlines the difficulties and expense of hosting such megatournaments. For instance, the total investment in modernising new stadiums, alone, for Euro 2016, is estimated at €1.6-billion, which, by itself, is larger than the reported target of €1.4-billion for broadcast rights and sponsorship income.

The mismatch between revenue and expenditure is even starker with the Rio Olympics. Brazil will spend at least $10-billion on this event, and probably much more in practice, potentially far in excess of any revenue the games can generate, especially if the Zika virus discourages tourists from travelling to the country.

The problems associated with the huge costs of staging the Olympics are also exemplified by Athens 2004, which occurred just before Greece’s slide into economic turmoil. Those games, at that stage the most expensive Olympics ever, are estimated to have cost about $12-billion but only generated about $3-billion in income, of which roughly half came from the sale of broadcast rights, one third from sponsorship and licensing, and about one tenth from ticket sales.

Athens 2004 became a symbol for the period of profligate public spending and unsustainable borrowing in the country at the turn of the millennium, and within days of the Olympic closing ceremony, the Greek government warned Brussels that the nation’s public debt and deficit would be significantly worse than anticipated. In 2005 the country became the first Eurozone country to be placed under fiscal monitoring by European Union authorities.

So, despite the fact that hosting major sporting events continues to be seen as a source of national pride, the evidence indicates that such tournaments do not generally provide a substantial economic boost to national economies from stimulus like capital investment and tourism. For instance, many of the visitors tend to come from the host country; their spending often simply displaces that on other domestic leisure services.

Moreover, the legacy value can be limited too. In the case of the Olympics, for instance, newly built facilities (aside from the Olympic Village which can be sold as high-end apartments) are often too large for most conventional sporting uses, and have significant maintenance costs, often leading to these facilities being dismantled after the games.

After the Greek Olympics, for instance, many facilities built at high cost simply became white elephant projects falling into disuse. In Athens a multi-kilometre walkway linking sports stadiums became a waste ground where people dumped rubbish.

Despite all these pitfalls, there is no shortage of cities wanting to host the 2024 Olympics, with Los Angeles, Budapest, Paris and Rome among current frontrunners to follow-up on the Tokyo-hosted games in 2020. Numerous countries have already expressed firm intent to host the 2024 European soccer championships, including Germany, Turkey and a consortium of Denmark, Sweden, Norway and Finland.

There is also a long list of states that have expressed interest in bidding for the 2026 football World Cup, which comes after the events scheduled for Russia in 2018 and Qatar in 2022, including Canada, Mexico, Colombia, Morocco, US, United Kingdom, Australia, New Zealand, and Kazakhstan. What this collectively underlines is that, for the foreseeable future, the perception that hosting such sporting events is a major symbol of national prestige will continue to trump the headaches that can come with staging them.

  Andrew Hammond is an associate at LSE Ideas (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics.

 

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