Olympics Won, Brazil's Work Begins

The IOC's nod to host the 2016 Olympics will require a crash program to upgrade Rio de Janeiro's sagging infrastructure

By Geri Smith

If there was any doubt that Brazil is on a roll—economically, politically, and diplomatically—that doubt was dispelled Oct. 2 when the International Olympic Committee voted to hold the 2016 Summer Olympics in Rio de Janeiro. The IOC chose Rio over Chicago, Madrid, and Tokyo after Brazilian President Luiz Inácio Lula da Silva made an impassioned plea for the Games to be held for the first time in South America.

"I honestly believe it is Brazil's time," Lula, as the President is popularly known, told the Committee before the vote. "Our rivals today have all hosted the Games in their countries before. For them it will be just one more Olympics. For us, it will be an unparalleled opportunity."

There is no doubt about that. Rio de Janeiro, a city of some 6 million people, has budgeted $14.4 billion to prepare for the Games, the largest amount offered among the four cities vying for the event. And it will need to spend every penny to build infrastructure that is sorely lacking in the fabled seaside mecca of sun, samba, and soccer.

Brazil Also Has the 2014 World Cup

Rio, which served as Brazil's capital for nearly two centuries until a new capital was built from scratch in Brasilia in 1960, is a beautifully situated city, ringed by ocean, tropical coastal rainforest, and a series of dramatically shaped rocks jutting from the ocean, including the picture-postcard Sugar Loaf mountain.

As gorgeous as the city is, its infrastructure went downhill after the capital moved to Brasilia. Few new roads and tunnels have been built in the past 20 years. Rio has dozens of three- to five-star hotels that each year receive hundreds of thousands of tourists for the world-famous Carnaval festivities, but many more will be needed.

Rio does boast the storied Maracanã soccer stadium, the largest stadium in South America, which was built in the 1950s for the FIFA World Cup and is being refurbished for the 2014 World Cup, which Brazil is hosting. Other facilities were built for the Pan American Games that Brazil hosted two years ago. But many more sports venues must be constructed.

"Rio de Janeiro needs to dramatically improve its infrastructure for an event of this magnitude," says Adriano Pires, director of the Rio-based Brazilian Infrastructure Center. "You name it—public transportation, subway, water and sewer, electricity."

Another Achievement for Lula

Rio's selection as the 2016 host city for the Olympics caps a remarkable record of achievement for Lula, 63, a former lathe operator who rose to become the country's most prominent labor union leader before winning the presidency in 2002 on his fourth try. Although he never finished elementary school, the bearded, folksy leftist leader has skillfully managed the country's economy, setting aside his old populist rhetoric to hew to prudent, conservative fiscal and monetary rules that kept the country from suffering unduly from the international economic downturn. That helped nab an investment-grade rating for the country's sovereign debt last year.

At the same time, he used the country's fast-growing pile of international reserves—now at a record $224.2 billion, thanks to recent record-high prices for soy, iron ore, and steel exports—to beef up social policies that have boosted the minimum wage by 45% in real terms in seven years and helped push 24 million Brazilians above the poverty line. The middle class, those earning from $617 to $2,600 a month, has risen from 38% to 50% of the population since 2003.

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