Risks undertaken by the government and private sector

Brazil. Brazil was awarded the opportunity to host the FIFA World Cup championship in 2014 and the Summer Olympics in 2016. Hosting two consecutive international sporting events was a huge task at hand that even developed countries had not undertaken, let alone developing countries like Brazil. The International Olympic Committee (IOC), however, felt that these events were important for a developing country to rise on the world platform and promote nation-building among its people - which will benefit the economy as well. These events led to the exact opposite - loss of faith of its citizens and a financial crisis. The development projects constantly ignored the infamous favelas of Brazil, which are low-income informal settlements. They symbolise the stark socio-economic disparity in Brazil, which is one of the highest in the world. No attempts were made to improve facilities surrounding these settlements, in fact they were tried to be concealed from the international cameras. Residents, seeing the kind of excessive expenditure on Olympics related infrastructure, hoped that those stadiums would not go abandoned like others from previous events (Malfini, 2016). Nonetheless, more than 12 of the 27 venues remain abandoned, in decay and disrepair, and are being vandalised. Rio De Janeiro is unable to repay its creditors, and the IOC has refused to help Brazil with its debt. Furthermore, a political scandal unfolded surrounding the Olympics with investigations into many government officials regarding large bribes for Olympic construction projects. In the aftermath of the mega sporting event, the citizens are suffering a financial crisis, extremely poor sanitation in the favelas and public employees are not receiving due payments. The promise of a safe city for all has not been met, and the city has been left in disarray (Drehs and Lajolo, 2017). Corruption in the system combined with the lack of foresight in planning resulted in this financial disaster which plagued the economy of the nation and its general public, the government and private investors alike.

Risks undertaken by the government and private sector

Anshuman Madan Malur, portfolio manager with DMI Finance, commented1 on the risks undertaken by the two primary sectors in infrastructure development. Governments keep changing over periods of 4-5 years, depending on the nation in consideration, and their perspective on infrastructure, therefore, remains short-term. The planning, development, building, maintenance and thereby recuperation of the investment in infrastructure done by the private sector, however, takes a much longer time. A delicate balance has to be maintained to ensure adequate risks are taken by both sectors.

The nature of infrastructure in a city (or in a specified region) is monopolistic. For example, there will be only one, or maximum two, airports in a city. But there will be a multitude of retail shops. Due to this reason, it is the government’s responsibility to ensure that the private entity with the lowest bid works on this project and subsequently charges the least toll from the

1 During a virtual meeting with Anshuman Madan Malur, he gave insights on various risks that the government and the private sector comes across.

7