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Olympic Games in Rio: Eldorado or fiasco?
Economy

Olympic Games in Rio: Eldorado or fiasco?

Wednesday, 03 August 2016
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Christophe Roulet
Editor-in-chief, HH Journal

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6 min read

In the name of sport, the modern Olympic Games stigmatise excess, social divides and cheating. So how are watchmakers liable to fare within this context? They will definitely not succeed in salvaging their year in Rio.

In referring to the Olympic Games, current figures tend to run into the billions. Facilities that cost billions to build, TV audience ratings in the billions, financial black holes swallowing up billions… These are measurable indications of the importance that sport has acquired within our societies, as a vehicle for its best and worst aspects. Where is the fine spirit shown by Milo of Croton – the fabled Ancient Greek wrestler and disciple of Pythagoras – in this pitiful affair showing the IOC incapable of deciding for itself whether the entire delegation of Russian athletes should be banned from competing because of the doping programme widely regarded as virtually state-sponsored? Greek sages were indeed skilled at conceptualising human affairs and in such an instance they would doubtless have spoken of hubris – a character trait that was considered by the gods as an expression of excess or pride.

The Rio 2016 Games were born of a dream nurtured by the former president Inácio Lula da Silva, who wanted to put Brazil on the economic world map.

The Rio 2016 Olympics about to begin in early August will doubtless also fall into this category. The figures are eloquent. To organise the event, Brazil has to date ‘invested’ around 14 billion dollars, a price tag 40% higher than the initial estimate. Some might be tempted to regard that sum as ‘peanuts’ in a country pervaded by corruption, where overbilling public works contracts is a national sport. The adventure has indeed been so capably handled that the Rio de Janeiro state government was forced to declare a state of ‘public calamity’ – what a delightful expression! – in order to receive around 900 million dollars of urgent federal aid in order to douse the financial fires. And it was indeed an emergency, since both firefighters (sic!) and police officers, whose salaries were no longer being paid, had taken to welcoming tourists at the airport with banners reading: “Welcome to hell; whoever comes to Rio de Janeiro will not be safe”. One could scarcely imagine better publicity. Especially since the urgent measures were required not only to soothe social unrest, but also to complete key facilities planned for the Games, such as line 4 of the underground intended to connect the Olympic village to the town centre and which will only operate intermittently given that the rolling stock has not been tested.

Rio de Janeiro
Rio de Janeiro © Marcelo Druck
Disenchantment

It is important to recognise that the Rio 2016 Games were born of a dream nurtured by the former president Inácio Lula da Silva, who wanted to put Brazil on the economic world map. That was back in 2009 and the country – along with the other members of the BRICS club comprising Brazil, Russia, India, China and South Africa – was viewed as an engine of world growth inured to the effects of the subprime mortgage crisis. In a recent interview given to the Swiss magazine L’Hebdo, Lula explained that “Brazil was experiencing an exceptional and historical phase. It was a kind of media darling. Our economy was booming and the world began to believe in us. Despite that enthusiasm, earning the right to host the Games in the face of competition from cities such as Chicago, Madrid and Tokyo was no easy feat. Some even said it would be impossible. Rio’s victory was moving and unprecedented. It was one of the most important days in my life. I witnessed the scene at Copacabana, where people were weeping for joy. It was extraordinary. Winning the Olympics was extraordinary for Brazil, precisely because there is so much to be undertaken.”

Seven years later, the prevailing mood is one of disillusionment. Inácio Lula da Silva himself is being sued for corruption in a country that no longer knows which president to follow, since there are two of them in office. The majority of the population is now against the Games which, instead of confirming Brazil’s rank as a major power, is on the contrary highlighting the precarious nature of its institutions. Not to mention the recession that the nation is currently enduring, with a 3.8% drop in GDP in 2015 that is likely to be replicated this year, an over 11% unemployment rate and double-digit inflation. Severely hit by falling commodity prices, Brazil had not experienced such a substantial economic setback since the 1930s.

Absorbing only about 50 million francs’ worth of annual exports, the market represents under 0.5% of the annual value of watch products leaving the country.
Unfulfilled hopes

Within such a context, it is hard to be optimistic regarding the opportunities that major world events generally represent for international brands and notably Swiss watchmakers. There are several reasons behind this unpromising outlook. Contrary to the 2014 World Cup also held in Brazil, which gave several Maisons, spearheaded by Hublot, a chance to assert their local presence, the Rio 2016 games are placed firmly under the watchmaking tutelage of Omega. In other words, as is the case for other sponsors of the Olympics who pay out vast sums to ensure exclusivity, the Games are very much the preserve of the official timekeeper. In addition, the Brazilian market, at one time considered extremely attractive with its 200 million-strong population and an upwardly mobile middle class, has definitely not become the promised Eldorado. One well remembers the hopes expressed for the region barely five years ago. At a summit held by Reuters in 2011, Jean-Marc Jacot, then CEO of Parmigiani Fleurier, enthused: “Brazil has huge potential for luxury products. It is set to become a key country that could become one of the five leading markets in the luxury sector within four to five years.”

Rio de Janeiro
Rio de Janeiro © Higor de Padua Vieira Neto

Nothing like that has come to pass. Brazil is not even among the 30 leading destinations for Swiss watch brands. Absorbing only about 50 million francs’ worth of annual exports, the market represents under 0.5% of the annual value of watch products leaving the country. It is also a well-known fact that Brazilians tend to travel elsewhere to buy their watches, due to the nearly 50% taxes levied on luxury products which are unlikely to be dropped given the state of the economy. So the decisions by Rolex, Omega or Hublot to open points of sale there are chiefly motivated by image-related factors rather than business perspectives. In 2014, a Brazilian year due to the World Cup with its great hopes of a triumph for the local team, Vacheron Constantin had opened an own-name boutique in Sao Paulo. At the opening ceremony, the company’s CEO Juan-Carlos Torres said: “This boutique will not be the most profitable in our network, far from it, but that’s not important. What really counts is being close to the clients we are targeting in order to provide them with reliable after-sales service.” Since then, the Vacheron Constantin boutique has been closed. And Brazil was beaten 7-1 by Germany in the semi-final…

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