The Stench of the White Elephants
Only now is the full scale of the corruption that surrounded the Brazil World Cup beginning to emerge.
A few days after the final of the World Cup, the most expensive stadium in Brazil and third-most expensive in the world staged another event: 100 couples held their wedding party at the ground that had served as one of the main venues for the World Cup. The event was broadcast by TV Globo, which paid for part of the World Cup rights and largely blocked any criticism of the event. In the TV report, the company insisted that the mass wedding had been a source of “great emotion” and that the stadium had created new opportunities.
With only two teams – Brasiliense and Luziânia, both of which play in the fourth division of Brazilian football — the Federal District became the image of the World Cup scandal and its non-existent legacy. Months after the World Cup final, the lack of games at the stadium obliged the government to transfer part of its bureaucracy to the Mané Garrincha, using the rooms for various different departments. The outside was turned into garage for city buses. A year after the World Cup, the deficit of the stadium was more than R$3.5 million (£610,000).
The reality is that the costumes have been taken off, Fifa has folded up the circus tent and is now preparing for its next venture: in Russia in 2018. A sports depression took over Brazil after the national championship with its absent public and their missing star players returned to occupy the millionaire arenas used at the World Cup. The illusion created by the World Cup was over.
Fifa may have enjoyed record income from the event, but the situation of Brazilian stadiums is radically different. Eight of the twelve arenas completed the first year after the World Cup with losses totalling R$120 million. Worse, there are no prospects of recovering the money invested.
In Manaus, the Amazonian teams have avoided using the World Cup stadium for the state championship games. The Arena, which cost R$2.5bn to build, costs R$700,000 per month in maintenance. But between the end of the World Cup and February 2015, the stadium hosted only seven games. Losses exceeded R$2.7m in one year. On average, the attendance at the 2015 Amazonas football championship was 659 people per game.
In Natal, the ABC club broke an agreement with the consortium that manages the Arena das Dunas. A contract provided that derbies were held in the stadium but in early March the match between ABC and America was held at another location, the Frasqueirao. America kept their games at the Arena, but in seven matches, the average gate was only 3500 – 10% of stadium capacity.
Even the Maracanã struggles to contain the financial deficit. To generate a profit for administrators, the stadium needs at least 30,000 fans per game. In the state championship in 2015, the average attendance was no more than 3600 per game. In the case of Flamengo, the average is 16,000. Result: a loss of R$77m in the first year after the World Cup. In January 2015, the Pantanal Arena in Cuiabá was forced to close its doors for “urgent” rennovations.
The World Cup was followed by a series of allegations and investigations into the costs of works and contracts. One year after the final, federal police launched Operation Fair Play, ironically using Fifa’s slogan. In August 2015, the authorities announced an investigation into claims that the Odebrecht construction company had won the tender for the construction of the Arena Pernambuco thanks to fraud and had overpriced the work by R$42.8m. The suspicion was that public officials were bribed to favour the construction.
Despite high costs, Recife ended up with only five World Cup matches, including four during the first phase. “We have indications that there was overpricing,” confirmed the Federal Police Chief Marcello Diniz Cordeiro. In June 2015, the president of the construction company, Marcelo Odebrecht, was arrested, accused of involvement in bribery in various projects.
Initially, the bidding was opened by the government of Eduardo Campos, who was killed in a plane crash in August 2014. The expected expenditure was R$532m. But when construction was over, the final cost was R$700m. The contract also stipulated that the state government would pay back Odebrecht for 30 years for possible revenue shortfalls at the stadium site and in projects taking place on neighbouring land.
The contract not only granted the right to build the Arena, but also to exploit commercially an area of Recife. According to a study by the Court of Pernambuco, this commitment meant that the state would transfer to the construction company a total of R$1.8bn over three decades. The suspicion is that Odebrecht allied itself to government officials in order to secure the financing facilities to build the stadium.
What the Federal Police also found was that the Organising Committee responsible for the construction of the Arena Pernambuco was led by the person who was elected, three years later, as the mayor of Recife, Geraldo Julio. The same Committee also included Paulo Camara, who later became state governor. In 2009, when the contract of the stadium was being negotiated, they were respectively President and Vice President of the Steering Committee of the Arena.
But the allegations of corruption are not only found in Recife. In August 2015, police seized spreadsheets and data in several Odebrecht offices in Brazil It’s suspected that the works at the Pernambuco Arena were not the only ones to involve overpricing.
Also in August 2015, a report from the Bahia Court of Auditors revealed overpricing in the works of the Arena Fonte Nova. In 2010, the stadium was built thanks to a contract between the state government and a consortium that included Odebrecht and OAS. The Court concluded that, in the public-private partnership agreement, the amount transferred from the government of Bahia to the companies would come to R$107m a year by 2025, an amount of money considered “excessive”. The report was delivered to the Federal Police, which began to investigate the case.
OAS, the company that administers the stadium, had their shares blocked by the courts as a result of the anti-corruption operations in Brazil, known as Lava Jato, the biggest investigation into corruption in the history of the country, and may be forced to sell their assets in the arena.
The corruption scandal also touched the works of Arena Corinthians, built by Odebrecht in Itaquera, in an area where there happened to be Petrobras pipelines. The pipes were removed in February 2012, but when the police studied the spreadsheets of accounts operated by Alberto Youseff, a known criminal who has been convicted of black-market financial dealings, they found the name of the stadium and work on the pipes. In the end, the stadium’s cost reached R$1.3bn, more than 42% higher than originally planned by the organisers.
The German engineering company Bilfinger confirmed in March 2015 that it had identified “possible improper payments” for contracts at the World Cup. “In the course of internal investigations into potential violations, Bilfinger has reviewed the activities of the group’s companies in Brazil for several months,” said a company statement. “After reviewing all transactions in recent years, reports indicate that a potential improper payment exists of US$1m in total.”
The suspicion is that Brazilian officials of a government agency collected bribes to offer contracts to the company. In 2014 the company signed contracts with the Brazilian government valued at a total of R$21.2m. In addition to the World Cup, the company provides services to Petrobras, the National Petroleum Agency, the Federal Senate and Anatel, the National Telecommunications Agency. There were R$13m in contracts just for the supply of 1500 monitors and software for the Centre for Integrated Command and Control for the tournament. The system was considered one of the main legacies of the World Cup and led to the centralisation of the security operation.
According to the German company, they were audited by Ernst & Young and Deloitte. “Bilfinger received inside information last year indicating that there may have been violations of ethical regulations by the group about providing monitors for the security centres in major Brazilian cities,” explained the company in a statement. “The company just opened a full investigation into the case. The complaint is linked to suspected bribery by Bilfinger employees in Brazil to civil servants and state officials.”
For anyone who was in the heart of the World Cup organisation, the case of Bilfinger sounds like just the tip of the iceberg of a system fitted to ensure profits not only for builders and for Fifa but also for accomplices, governments, civil servants and tens of intermediaries, even if it has meant wasting billions of Reais and a non-existent legacy. Brazil has undoubtedly been looted. And Fifa knew it.
When I asked Sepp Blatter at the last day of the World Cup what he thought would be done with the Brazilian stadiums, he replied by drawing a question mark in the air. When, a year after the World Cup, I asked a high-ranking official at Fifa what they thought of empty stadiums and the debt in the accounts, he just smiled and said, “It is no longer our problem.”
This is an edited extract from Jamil Chade’s new book, Política, Propina e Futebol, published by Objetiva.