The recent selection of Rio de Janeiro as host city
for the 2016 Olympic and Paralympic Games just underlines what many
have being saying for some time now: that Brazil has truly arrived
as a power on the international stage. Even before the
Olympics arrive, Brazil will be hosting the Confederations Cup in
2013 and the FIFA World Cup in 2014.
Brazil’s stable economic policies and
burgeoning domestic market mean that it has been less affected by
the world economic slowdown than many countries, so it has come to
be seen as something of a safe haven for investors. The
discovery of massive oil reserves off its coast has boosted
Brazil’s geopolitical importance and economic prospects.
Despite all this, there are many saying that
Brazil, and more particularly Rio, are not ready for the Olympic
Games. There are certainly a number of areas that will
require serious attention and the authorities have a lot of work to
do between now and 2016 to improve Rio’s
infrastructure. However, the same could be said of London,
with just over two years to go until its Games.
The Federal, State and Municipal Governments have
committed to invest US$14.4 billion in hosting the Rio Games and in
improvements to the city’s infrastructure. As well as
the sports facilities themselves, Rio’s candidacy dossier
proposed significant investments in transportation, hotels and
urban redevelopment, which have the potential to transform this
city and give an additional boost to the Brazilian economy.
These infrastructure investments will present
opportunities for consultants, developers and contractors.
The experience of British firms in developing the infrastructure
and dealing with masterplanning and transportation issues for
London 2012 may prove particularly sought after.
Major Infrastructure Projects
Major investments planned in connection with the
Rio 2016 Olympic Games include the following:
- Development of an Olympic training centre in Barra da Tijuca,
combining various sports facilities that will be used for training
and competition during and after the Games;
- Construction of the Olympic village and media village in the
vicinity of the Olympic training centre, to house athletes and
press during the Games, and over 4,000 families after they
- Redevelopment of the Rio port area, to include residential,
entertainment and tourism facilities;
- Adding 20,000 hotel rooms to reach a total of almost 50,000,
some of which will be temporarily provided during the Games in
cruise ships that will be moored in the newly redeveloped
- Expansion of the international airport from the current
capacity of 15 million passengers per year to 25 million, including
the construction of two satellite terminals, refurbishment of the
existing terminals, extension of the runways to accommodate Airbus
A380 jets and additional car parking and cargo storage;
- Improvements and extensions to the Rio metro and commuter
trains, including the construction of seven new metro
- Creation of three rapid transit bus systems with designated bus
lanes connection the North and South zones of the city to the main
Olympic facilities in Barra da Tijuca;
- Construction, extension or widening of around 170 kilometers of
roads, including a new ring road.
It is clear, even from this abbreviated list, that
delivering all of these improvements by 2016 will be a logistical
and financial challenge. In fact, the majority of these works
are planned to be completed in advance of the World Cup in 2014,
which shortens the time frame even further.
So how will these investments be
The Rio 2016 candidacy committee liaised closely
with the London 2012 organisation throughout the planning stages
and they seem to have adopted a very similar corporate governance
structure. An ‘Olympic Development Authority’
(ODA) will be created to co-ordinate the delivery of capital
investments and Government services required for the Games across
all the various organs of Federal, State and Municipal
Government. Within the ODA, the Government will also
establish an Olympic Traffic and Transport Division (OTTD) and
Olympic Sustainability Division (OSD) to deal with these specific
aspects of the preparation.
There will also be established the Rio 2016
Olympics Organising Committee (OOC), which will be a
non-governmental, non-profit making organization incorporating
private sector and community stakeholders. The OOC will
manage operational planning and delivery of the Games and will be
funded from the proceeds of transmission rights to the Games, as
well as from private (45%) and governmental (24%) sources.
The ODA and OOC will work together in a Joint
Olympic Steering Committee and both will be subject to the overall
supervision of the Olympic Board, which consists of the chairmen of
both entities, the Federal Minister for Sport, the State Governor,
the City Mayor and the presidents of the Brazilian Olympic
Committee and the Paralympic Committee.
So how will these investments be financed and
In the case of the sporting venues, a number of
them have already been constructed, for the Pan-American Games,
which Rio hosted in 2007. These are operated by private
companies or the Brazilian Olympic Committee under concession from
the municipal government.
New venues, such as the Olympic training centre,
the extreme sports park (hosting BMX and slalom canoeing) and the
modern pentathlon park, will be financed by the Government through
the ODA. The applicable construction contracts and supply
contracts are therefore subject to the Brazilian tender
legislation, which requires an open, fair and transparent tender
for Government works. Tenders will be open to qualified
Brazilian and international contractors and judged according to the
criteria of capacity, quality, experience and sustainability.
Temporary works required in connection with the
Games will be contracted by the OOC. As such, the legislation
relating to public tenders is not applicable, but Rio’s
candidacy proposal committed to tender these temporary works in
accordance with those rules.
The Olympic village and media village, on the other
hand, will be private initiatives. The site is owned, and
these facilities will be built, by Carvalho Hosken, a major
Brazilian property developer, with financing at concessionary rates
of interest guaranteed by the Brazilian Federal Savings Bank.
However, the Organising Committee will be responsible for the
overlay of temporary facilities and so will be involved throughout
Other facilities, such as the International
Broadcast Centre and the Media Centre will be developed by public
private partnerships. These developments will subsequently
host commercial, office and hotel facilities.
Transport projects will be coordinated by the OTTD,
although they will be implemented by the relevant Government organs
currently responsible for the various forms of transport. In
the case of airports, this is INFRAERO (a public company owned by
the federal Government); in the case of trains, this is SETRANS
(the State transport authority); and in the case of roads and
buses, this is DER (the State highways department) and various
municipal departments. Private sector investment will be
involved in road and rail projects.
Olympic Challenges and Dreams
You will note from the foregoing that delivering on
Rio’s Olympic dream will depend on a rich tapestry of
different governmental and non-governmental entities with
interwoven responsibilities. One of the most important
challenges will be ensuring transparency and accountability within
this system. Rio’s experience in hosting the
Pan-American Games provides a cautionary tale in this respect;
having faced criticism for exceeding its budget, with allegations
of over-charging by contractors, and failing to deliver the legacy
infrastructure that was promised.
Cost control is always a challenge when the most
important driver is finishing on time, but the risk of overruns can
be minimized during the contracting process through appropriate
sharing of risk and the inclusion of sufficient audit rights.
Likewise, timely delivery must be properly addressed, with a focus
on prevention, rather than remedies. What use are liquidated
damages if the Olympic stadium is not ready when the eyes of the
world turn to Rio, or London?
The Government is taking these issues
seriously. The governance structure they have proposed
contains a series of checks and balances. They have also
launched a Rio 2016 transparency website to inform residents about
development proposals, budgets and construction timetables.
It is to be hoped that lessons have been learned from the
Pan-American Games, because if Rio is able to deliver on its
ambitious plans for the Olympic Games in 2016, this will be a truly
transformative event, giving this marvelous city the infrastructure
it deserves and stimulating private investment. If it
achieves this, Rio 2016 will be an international showcase for the
best of Brazil.
CMS Cameron McKenna LLP has an Energy, Projects and Construction
Group comprising 18 partners and over 100 lawyers. A team led
by Victoria Peckett has been advising on major projects for the
London Olympics for the last four years.