Beyond Rio 2016: Competing for the World Stage

What now, José
The party is over,
the light is out,
the people have left,
the night is cold,
what now, José?"

Sidney N. Nakahodo
October 12, 2016

The words of Carlos Drummond de Andrade, one of Brazil’s most beloved poets, brings to life the doubts and sentiments that many of his countrymen expressed after the close of the Rio Olympic games. As the attention shifts back to domestic problems, Rio’s experience on the world stage incites important reflection for the entire nation.

In contrast to the political and economic crisis that currently haunts Brazil, the scenario was very different when Rio de Janeiro was announced as the host city for the Games of the XXXI Olympiad in 2009. The news took place in the aftermath of a global financial crisis of which Brazil emerged almost unscathed. Many believed that such a demonstration of economic resilience indicated the re-awakening of the long awaited emerging power. The Economist went so far as to publish the statue of Christ the Redeemer on its cover page as a launching rocket with the title “Brazil takes-off.”

The past two years have been especially tough for Brazilians. Just like in a script from one of Brazil’s most popular soap operas, reality has trumped fiction. Both economic stagnation and corruption scandal arrived at an unprecedented rate with hardly any warning. In addition to facing the deepest recession in decades, the country has been mired in political controversy which culminated in the recent impeachment of Dilma Rousseff.

No single factor can explain why things faded so deeply and so fast in Brazil. One argument for the deterioration can be made for Brazil’s slow progression toward globalization and embrace of international markets, which may have contributed to magnifying the effects of the crisis. In particular, the disconnect to the global chains of value, a high dependence of private sector on public funding, and the strong emphasis on promoting national champions have all limited the economic benefits of integration with the rest of the world.

Firstly, historical protectionist positions have impaired Brazil’s ability to negotiate trade agreements. In a forthcoming article, part of a book that aims to explain the roots of the current crisis, World Bank economist José Guilherme Reis argues that bureaucrats and business organizations have worked together to protect the industrial sector. Unlike other big countries, Brazil is not a major exporter, and the missed opportunities are therefore clear. According to Edmar Bacha, one of the architects of the stabilization plan that ended the country’s hyperinflation in the 1990s, Brazil remains one of the most closed economies to foreign trade. The slowdown of China has deeply impacted the Brazilian exports. Only in the past few months has trade balance started to improve, due mostly to falling imports resulting from the depreciation of the Brazilian real and economic recession rather than an increase in exports.

Secondly, industrial policy and targeted interventions aimed at promoting specific sectors has negatively impacted Brazil. The main example is how local content requirements and restriction to foreign participation have limited Petrobras access to state-of-the art technology and raised exploration costs of critical pre-salt reserves, the deep water oil fields that would turn Brazil into a major player among oil exporters. The collapse of oil prices placed additional pressure and aggravated the giant state-owned company’s finances.

Third and more broadly is the dark side of state capitalism, which was brought to the surface through a series of corruption scandals. In all fairness, Lula da Silva and Dilma Rousseff did not invent the bribery schemes that involved the payment of kickbacks in exchange for large government contracts. However, under their leadership, the practice was raised to new heights. This happened in large part because of government-led expansion of state-owned enterprises and the close association with large Brazilian conglomerates, notably construction firms.

The Aftermath of Summer Games 2016

Whether or not Brazil is prepared to benefit from larger international exposure, the country remains a driving force in shaping global affairs. Beyond being a powerhouse in the world’s most popular sport, the country also thrives as a competitive agriculture producer and a dynamic aerospace contributor, to name a few sectors.

Since the organization of the Pan-American Games in 2007, Rio has hosted several prominent events, including the Military World Games in 2011, the United Nations Conference on Sustainable Development (Rio+20) in 2012, the FIFA World Cup in 2014 and most recently, the Olympic and Paralympic Games. The preparation of these mega-events have benefited the city in many ways. For instance:

  • Rio has learned to deal with strict deadlines and global expectations. In a country where the “jeitinho” is still part of the local culture, the Marvelous City had to conform to stringent standards and circumvent budget and logistical constraints. Such events led to the development of mobility infrastructure such as a tram service, a network of express bus corridors, and an extension of the current metro lines;
  • International best practices and state-of-the-art financial instruments enabled important projects. Moody's estimates that the Olympics might have generated about $7.1 billion in infrastructure for Rio, including the construction of Porto Maravilha;
  • Increased cultural standards and global prestige for Rio and Brazil as a cultural elite. Most notably, through the Spanish architect Santiago Calatrava who designed the iconic Museum of Tomorrow, which is now to Rio what the Guggenheim represents to Bilbao.

Alongside other media vehicles, the New York Times has suggested that Rio could emerge as a new city with an elevated standing globally after the Olympics. The transformation might have started as early as winning the Olympic bid in 2009. A recent study by the Getulio Vargas Foundation reports that social indicators began improving almost immediately upon winning the Olympic bid, and they have only continued to climb.

Rio had to overcome significant odds in order to host the recent mega-event. Infrastructure problems, endemic violence, water pollution, zika epidemic, and threats of terrorist attacks,f in addition to political and economic crises domestically, were some of the challenges the Olympic host city faced. The city administration was also heavily criticized for the eviction of families that lived in areas re-built as Olympic venues. Nevertheless, Rio still managed to produce a dazzling display of athletic and public relations achievement.

Beyond the surroundings of the Copacabana beach, there is room for optimism in the aftermath of the Games. The impeachment of Rousseff ends a long period of political uncertainty. The country has started showing signs of relief from the recession, and Brazil continues to attract foreign investors. After years on the sidelines, foreign policy has re-emerged at the forefront of the government’s agenda.

The magnificent opening ceremony amazed billions of viewers, presenting the most thrilling and historic aspects of the host country to a global audience. The heartfelt welcome, ethnic diversity, and expressions of rich cultural tradition are at the core of its underexplored soft power. Despite the exuberance, the main story of the Rio Olympic Games was not about boosting Brazil’s self-image. Instead, it should be the tale of a nation searching for its place in the world all the while reinventing itself. Out of all the medals won and records broken from those two weeks, the true legacy for the Olympic Games remains to unfold as Brazil continues to evolve its standing on the global stage in the months and years to come.

Sidney Nakao Nakahodo is a Lecturer at Columbia University where he specializes in Political, Social, and Economic Development in Brazil. In parallel to his academic responsibilities he is currently involved in a number of technology startups, both as co-founder and advisor.