Amid Economic and Political Crisis, Rio Olympics Run 51 Percent Over Budget

July 7, 2016 Updated: July 10, 2016    

With the opening ceremony less than a month away, Brazil’s Olympic Games have a cost overrun of $1.6 billion, according to a new study. The preliminary cost, which is running 51 percent over budget, is still modest compared to previous games, but comes at a time when Brazil is facing an economic and political crisis.

A new study from Oxford University’s Saïd Business School has analyzed the costs of the Olympic Games since 1960 and benchmarked the Rio 2016 Olympics against previous games.

“The billion-dollar-plus cost overrun on the Rio Games comes at a time when Brazil can ill afford it, given that it’s facing its worst economic and political crisis since the 1930s. The state of Rio de Janeiro is particularly hard hit by the recession,” said Professor Bent Flyvbjerg, lead researcher of the study.

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The Oxford Olympics Study 2016. (screenshot)

“But Brazil is not a unique case. All summer and winter games that we’ve studied have shown cost overruns,” Flyvbjerg said. “For a city and country to host the games is a huge undertaking and one of the most costly and financially risky megaprojects they can undertake.”

When Rio decided to bid for the Olympics, the Brazilian economy was doing well.
— Bent Flyvbjerg, professor, Oxford University
With only one month away, work continues at the Beach Volleyball Arena on Copacabana Beach in preparation for the Olympic Games in Rio de Janeiro on July 4.  (Matthew Stockman/Getty Images)
With only one month away, work continues at the Beach Volleyball Arena on Copacabana Beach in preparation for the Olympic Games in Rio de Janeiro on July 4. (Matthew Stockman/Getty Images)

Rio’s acting governor declared a state of financial disaster last month. The state cut budgets across the board, including that of the police, whose officers’ salaries have been delayed.

And at the national level, far-left wing President Dilma Rousseff was suspended in May amid an ongoing impeachment trial. Vice President Michel Temer took over Rousseff’s post.

“When Rio decided to bid for the Olympics, the Brazilian economy was doing well,” he said. Now, almost a decade later, the costs are escalating with a lack of funds to cover them.

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The Oxford Olympics Study 2016. (screenshot)

The Oxford study analyzed both Summer and Winter Games, starting with the Rome 1960 Summer and Squaw Valley 1960 Winter Games. 

Nearly half of all games exceed their budget by more than 100 percent.

“The Olympic Games are unique in their complexity and huge expense and we need to try and avoid situations such as Athens 2004, which contributed to Greece’s economic problems and is still being played out a decade later,” Flyvbjerg said.

The Oxford study also reveals that with an average cost overrun of 156 percent in real terms, the Olympics have the highest cost overrun of any type of megaproject in the world.

“All games come in over budget,” Flyvbjerg said. Nearly half of all games exceed their budget by more than 100 percent.

The Rio 2016 Games, at a preliminary cost of $4.6 billion, appears to be on track to reverse the high expenditures of London 2012 and Sochi 2014, the report says. The cost overrun for Rio–at 51 percent in real terms, or $1.6 billion–is lower than the average cost for all previous games.

A general view of the Olympic Stadium during the Ibero American Athletics Championship, test event for Rio 2016 Olympic Games, in Rio de Janeiro on May 15. (YASUYOSHI CHIBA/AFP/Getty Images)
A general view of the Olympic Stadium during the Ibero American Athletics Championship, test event for Rio 2016 Olympic Games, in Rio de Janeiro on May 15. (YASUYOSHI CHIBA/AFP/Getty Images)

The average sports-related cost of hosting the games over the past decade has been $8.9 billion. The most expensive Summer Games to date was London 2012 at $15 billion; the most expensive Winter Games was Sochi 2014 at $22 billion.

The study also highlights the importance of “The Olympic Games Knowledge Management Program.” The program has been effective in helping to reduce costs, through better knowledge sharing between host cities.

The study also criticizes host governments and the International Olympic Committee for not being transparent about the true cost and cost overrun of the games. For example, the U.K. government claimed that the London Games came in under budget, but the real cost overrun for London was 76 percent, or $6.5 billion, according to the report.

The Rio 2016 organizing committee denied the study’s conclusions, according to an article by Financial Times

“This report serves only one goal: to speculate on an overrun and create negative publicity,” the committee said.

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