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Olympics update: Beijing in, Boston out (Part Two)

In the prior post, we asked a rather unpleasant question: where a government reasonably believes that hosting the Olympic Games would cause losses to the public fisc, but nonetheless submits a bid, has that government acted corruptly?

Not necessarily, and here’s why. Public discourse on the “legacy” of the Olympic Games generally focuses on physical infrastructure. We identify the needed upgrades, estimate their cost, try to predict their long-term economic benefit, and then decide whether hosting the Olympics would be “worth it.” But that’s far too narrow a focus.

Take Brazil for example. In hosting both the World Cup and the Olympics, the government has indeed built a number of facilities. But so too has it adopted a whole host of new laws and procedures designed to improve efficiency and accountability. These legal reforms – which I’ll be discussing at some length over the next year – should prove of lasting benefit to Brazil. So too are the Brazilian people at a cultural turning point, as tolerance of official corruption is dropping steadily. All the while, the still-expanding Petrobras investigation lends new credibility to the country’s enforcement agencies. The Olympic Games will prove both a catalyst to these changes, and a medium for broadcasting them to the world.

By contrast, consider Russia, a fellow BRIC nation that is also hosting the FIFA World Cup and Olympic Games back to back (though in the opposite order). It emerged from the Sochi Olympics looking more corrupt and inept than ever, illustrating the power of these events to broadcast a developing nation’s governance reforms . . . or not.

In sum, I’d like to suggest that Brazil’s legal infrastructure — the laws, institutions, and practices, as well as the cultural norms surrounding them — will prove to be at least as important a legacy of the Rio Games as any stadium or airport.

What does this mean for our original question: whether seeking to host the Olympics, knowing that it will likely result in short-term financial losses, is inherently an act of corruption? If a nation stands to gain in governance and reputation, then it is not.  Modest financial losses may be a price worth paying. But this only applies to developing countries whose legal institutions, and worldwide reputations, are still emerging. Like Brazil, or Russia, or South Korea, or China — the countries that most stand to benefit from these Games. And unlike Boston, who probably had little to gain.

More on these themes in the coming months.

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Andy Spalding is a Senior Editor of the FCPA Blog and Assistant Professor at the University of Richmond School of Law.

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