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The Sports Economist

World Cup stadiums: aglitter now, a black hole in the future?

The World Cup stadiums that South Africa has built have won great praise. But will they be a drag on the economy in the long term?

By Guest blogger / June 20, 2010

A Brazil fan stands next to Soccer City Stadium before the World Cup match Sunday between Brazil and Ivory Coast in Johannesburg. South Africa's new stadiums have won great praise, but will they be an economic boon in the future?

Marcio Jose Sanchez/AP

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I have been watching quite a bit of World Cup coverage, and the announcers seem to have gone out of their way to complement the new stadiums built for the event. Yes, they look great. But what will the legacy of the World Cup be? We won’t know for many years, but looking back at some recent mega sporting events can provide some hints, even at this early date.

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Case in point: the 2004 Athens Summer Games. A recent Wall Street Journal article documents the sad economic legacy of those games. Six years after the Athens games, most of the venues sit empty, providing nothing but urban blight. While it is unlikely that debt from the Olympics caused the Greek debt crisis, they spent between $7 and $14 billion compared to the current $370 billion in public debt outstanding, it certainly didn’t help the situation. I guess it’s a commentary on Greek accounting that no more precise estimate of spending exists. Didn’t they keep the receipts?

One of the facilities highlighted, a complex of stadiums for field hockey, softball and baseball, cost $213 million to build and now stands vacant and padlocked behind a chain link fence. The complex is unused because these are sports “with little or no following in Greece.” Yeah, that was completely unpredictable when the complex was built. The fact is, the Olympic “bidding” process compels host countries to build the largest, most lavish venues in order to win the rights to host the games. The real cost of the Games comes from the debt issues to build these facilities. Nobody want to talk about that when the bids are evaluated.

What about the ongoing costs of operating the Olympic venues in Athens? According to the article

 

Mr. Pyrgiotis, who heads the agency overseeing the use of the venues, figures the sites are losing about $12.3 million a year. Most of the vendors who have leased sites for other uses aren’t able to pay.

 

South Africa has annual GDP per capita of about 10,000, and 50% of the population lives below the poverty line. I’m sure they will be easily able to pay the principal and interest on the $1.4 billion in debt issued to build and renovate stadiums for the Word Cup, and the ongoing operations and maintenance costs. And so will Brazil, host of the 2014 World Cup and 2016 Summer Games. Brazil is effectively starting from scratch in terms of Olympic venues. I wonder how popular field hockey, baseball and softball are in Brazil? Check back in 2022 for an update.

Hat tip to Tyler.

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