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From issue: Latin America's Real Middle Class (Fall 2012)

AQ Feature

Infrastructure: Brazil, the World Cup and Olympics

With the 2012 London Olympic Games over, attention has shifted to Brazil as host of the 2014 World Cup and the 2016 Summer Olympics. But a worrying amount of work needs to be done.

Brazilian officials have promised that public works projects such as overhauling urban transit, airports and ports, building new roads, sports stadiums and hotels, and upgrading communications and the energy grid, will be completed on time. But there’s reason to be skeptical. Five years after the International Federation of Association Football (FIFA) awarded the World Cup to Brazil, and three years after Rio de Janeiro won the International Olympic Committee (IOC) bid to host the Summer Olympics, delays, cost overruns, lawsuits, and corruption have dampened the celebrations.

More than half of the planned World Cup–related infrastructure projects were expected to be ready by the end of 2013. But as of May 2012, just 5 percent of the projects had been completed and ground had not been broken for an additional 41 percent needed for the World Cup, according to Sports Minister Aldo Rebelo. Among the remaining planned projects, 17 percent were still in the public bidding process, and 15 percent had yet to even reach the bidding phase.

The lack of progress prompted FIFA Secretary General Jerome Valcke to say in March that a “kick up the backside” was needed to move things forward. By August, Valcke had changed his tune: “No stadium is behind schedule. All the projects are proceeding well and we have reached cruise speed.”

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Hopefully, his more recent optimism is substantiated. As much as $1 trillion in public and private funds are being spent on public works in preparation for both events, according to government estimates. Public expenditures alone are estimated at $31.3 billion.

Recognizing the potential long-term multiplier effects, President Dilma Rousseff is pushing through the sale of infrastructure concessions to public-private consortiums.

Major airports in São Paulo, Brasilia and Campinas were auctioned in February, with three separate private consortia winning the concessions to operate and upgrade each airport. In mid-August, Rousseff announced the sale of 133 billion reais ($66 billion) in concessions for 7,500 kilometers (10,900 miles) of toll roads and 10,000 kilometers (6,200 miles) of railways. About half of the money is to be spent over the next five years.

In 2009, Infraero, the government airport management agency, estimated that 5.3 billion reais ($2.6 billion) would be needed to upgrade the country’s 31 airports to accommodate the 600,000 foreign and 3 million local tourists expected during the World Cup—with much of the tab to be picked up by private investors. Still, work has started on just 18. In fact, about 45 percent of the major transportation projects planned, including airport renovations, have not yet begun—a concern since the World Cup will take place in 12 cities.

Hotel space is another challenge. Today, Rio can accommodate only 52,000 tourists. Beyond building more hotels, the gap will be partly covered by berthing six cruise ships—adding 10,000 rooms—in the port during the World Cup. But to accommodate the ships, the port must be revamped, which is not expected to be ready until May 2014—just ahead of the opening match.

The Porto Maravilha redevelopment—a $7 billion public-private partnership that began in April 2010 and is aimed at revitalizing 5 million square meters (54 million square feet) of central Rio’s waterfront—is a flagship initiative of Rio’s urban renewal program. The project includes: construction of three sewage treatment plants as well as 700 kilometers (430 miles) of sewage, water and drainage works; demolition of a 4-kilometer (2.5-mile) elevated roadway; renovation of 4 kilometers (2.5 miles) of tunnels; and construction of 70 kilometers (43 miles) of roads, 650 square kilometers (250 square miles) of sidewalks and 17 kilometers (11 miles) of bike paths.

That ambitious undertaking has been accelerated by pressing infrastructure demands. One of the most important Olympics transportation projects is now unlikely to be finished until 2019—well after the athletes have gone home. Bidding for a 500-kilometer (310-mile) bullet train line connecting São Paulo and Rio de Janeiro, with an estimated price tag of 60 billion reais ($29.5 billion), was to begin in 2009 and has been pushed back to late 2012.

On the positive side, construction on light-rail projects in eight of the World Cup host cities is under way, or is expected to be completed by the opening. Rio will expand its metro, adding a third line to its two existing ones that will reach into Barra de Tijuca—the site of most of the Olympic events. One of the three additional Bus Rapid Transit (BRT) lines is already functioning.

In total, of the estimated 235 planned infrastructure projects for the Olympics, only 66 were finished or nearing completion by late summer 2012. The IOC requires that all sports venues be ready between mid-2015 and early 2016. Odebrecht, with building projects that include four World Cup stadiums and the Olympic Park, is optimistic that the Olympic venues will be completed. “The projects at the heart of the Olympics are in motion,” according to Benedicto Barbosa da Silva Junior, the CEO for Odebrecht’s Brazil infrastructure unit, in an August 2012 interview.

Still, the odds of meeting this deadline have been complicated by ongoing legal disputes and the logistical challenge of building so many projects at the same time.

Adding to the problems: initial estimates for repairing and upgrading stadiums have ballooned from 2 billion reais ($981 million) to 6.9 billion reais ($3.4 billion), with most of it public money. The centerpiece is a $600 million refit to Rio’s famed 80,000-seat Maracanã stadium, which will host the World Cup final as well as the opening and closing ceremonies for the Olympics.

Bidding on the Olympic Park, which will host the athletes and nine events, has been delayed by lawsuits brought by families who face eviction as a result of the 1.4 billion reais ($677 million) project.

Moreover, construction of the Olympics golf course—located just 5 kilometers (3.1 miles) from the Athletes’ Village—has been snarled by a land dispute now under review by Brazil’s Higher Court of Justice.

The IOC has responded diplomatically, but firmly, to the delays. While praising the work done so far, it has reminded organizers that the deadlines are getting tighter and the workload is increasing.

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