ATR First: Rio 2016 Suppliers Still Waiting to be Paid

(ATR) Suppliers tell Around the Rings they are still waiting for payments from Rio 2016 nearly three years after the Olympics.

There also appears to be no end in sight to the delay, which has left some companies in a financial bind.

Rio 2016’s debt is estimated at around $113 million (R$420 million) according to a report from the Jornal Noroeste, in Brazil. Rio 2016 did not return multiple requests from ATR for comment about the status of the committee’s debt.

Any true confirmation on Rio 2016’s debt would have to come from the committee itself, which is subject to numerous lawsuits, or an external audit. ATR understands that the printed number in Jornal Noroeste is largely accurate, but there is no public audit of Rio 2016 available to view.

Rio 2016 underwent audits following the arrest of former President Carlos Nuzman in 2017 to determine if any of Nuzman’s alleged corruption touched the committee. Rio 2016’s Brazilian website remains under construction, despite a note saying it would return online on July 2, 2018 at 9 o’clock in the morning. The English version of the website redirects to the IOC website's landing page about Rio 2016.

Ivo Silva, a board advisor to IRMARFER Structures, says that Rio 2016 has routinely breached its agreement with the company dodging payment for services the company provided to the Olympics. IRMARFER, a Portuguese company, provided temporary tents used throughout the Olympic Park and Olympic Village, including the Olympic dining hall.

Documents reviewed by ATR show that IRMARFER had an agreement for Rio 2016 to pay off R$12 million ($3.03 million) owed for the Olympic tents by July 31, 2017. The terms of the agreement said that should Rio 2016 fail to pay off the debt, the subsequent interest would push the debt to approximately R$20 million ($5.05 million).

IRMARFER had already renegotiated its terms with Rio 2016 according to the documents provided.

Silva told ATR that IRMARFER gave Rio 2016 "comfortable conditions", reducing its fee between 20 and 25 percent to settle the outstanding payments. Once the contract was signed, Rio 2016 "failed to settle this agreement" and the company went to the special court created for matters related to the Olympics in Rio de Janeiro.

"After this constant failure from the local committee, by going from agreement to agreement to earn only time until they have nothing to discuss with us because they have asked the Brazilian justice system to be recognized as a company in bankruptcy, I think this behavior was always well prepared so they knew what they were doing," Silva said.

"The last time we talked with [Rio 2016] was more than a year ago. From that time to now we have had no contacts with them because it is like a company that does not exist anymore."

After Nuzman’s arrest, Rio 2016 appointed new leadership and has operated in wind-down mode trying to settle debt with only a few full-time employees. The current President of the committee is Ricardo Trade, who is also senior director of operations at the Brazilian Basketball Confederation.

Silva said that IRMARFER has suffered because of the delay in payment, so much that the company has had to reduce its staff and lay off workers to account for the missing revenue.

IRMARFER is not the only company in the situation of waiting for the Brazilian justice system to resolve lawsuits against Rio 2016. Silva said that other companies associated with the Association of Global Events Suppliers (AGES) regularly have discussed a lack of payment, including the major supplier GL Events.

Neither AGES nor GL Events returned requests for comment about the situation with ATR.

Silva believes that if Rio 2016 will not resolve its outstanding debt, then the IOC should step in to resolve the situation on behalf of private suppliers.

An IOC spokesperson told ATR that it "has continued to support Rio 2016 to facilitate its dissolution process," and said the IOC went beyond its stated contribution in the 2016 Host City Contract to help balance the organizing committee’s budget.

However, the spokesperson acknowledged that for private creditors in limbo there should be a renewed push to resolve "substantial commitments made by the different levels of government" that are outstanding.

"The IOC has offered twice since the beginning of 2018 to the different levels of government to discuss this unfortunate situation without any response so far," the spokesperson said. "Despite the fact that the IOC has closed its financial relations with Rio 2016 at the end of 2016, the IOC is very open to find jointly a solution in the interests of all those affected by this situation."

Rio 2016 required government funding to the organizing committee to allow for the staging of the Paralympic Games. At the time organizers estimated the contributions amounted to around one percent of the budget.

The organizing committee had issues recouping the necessary public money, as both the Rio de Janeiro state and municipal governments have had budget shortfall issues in the aftermath of the Games.

Rio de Janeiro has a new mayor and state governor since the Olympics ended, and Brazil has a new president. Both the state governor and Brazilian President were elected in October 2018, with mandates beginning on Jan. 1.

President Jair Bolsonaro has downgraded sports from a full ministry in the federal government to only a secretariat within the Ministry of Citizenship. Meanwhile, Rio Governor Wilson Witzel’s administration told ATRthat it would adhere to a 2017 court decision, which blocks it from settling debts with Rio 2016.

"The State Government will follow the recommendation of the TCE, which determines the suspension of any payment to the Organizing Committee of the Olympic Games, and the state government cash deficit comes from the loans at that time," Cris Rocha, a state government spokesperson told ATR.

Rocha addedthat the situation remainded the same as it did when Witzel took over as governor, and that "the IOC has not contacted the current government".

Outside of potentially bailing Rio 2016 out, the Brazilian federal government must navigate the long-term future of the Olympic Park in Barra da Tijuca. The federal government currently administers large portions of the park, and has been working with the Brazilian National Development Bank (BNDES) to find a private operator.

Currently the Olympic Legacy Management Authority (AGLO) administers the Olympic Park. AGLO was chartered by the Brazilian Federal government as a transitional body comprising the old Olympic Public Authority, which oversaw Olympic construction. By law, AGLO's mandate only lasts until June 30, 2019.

Should no operator be found by that date, the Federal Government will continue to administer the park with public money from the federal budget.

A spokesperson for the Special Secretariat for Sport of the Ministry of Citizenship told ATR that the secretary continues to "carefully monitor the debt issue" with Rio 2016, but stressed the federal government is only involved in resolving the issue as a facilitator. However, the secretary could not comment "on numbers from a private association such as Rio 2016 Committee".

"The federal government has fully complied with the commitments made for the event and has no legal responsibility in relation to the debt," the spokesperson added. "Even so, as one of the partners of the Rio 2016 Olympic Games, it has facilitated contact and talks with the entities involved, in an attempt to reach an adequate solution."

According to reports in O Globo Rio 2016 is expected to declare bankruptcy as soon as the end of the month .Should that happen, it will kick off another lengthy legal process in Brazil meaning suppliers could be facing even longer times to recoup money.

"We were a five-star provider [for Rio 2016], but we have not received the same treatment with concern to the payment," Silva said.

"It is very frustrating to a company like us, we are a medium [sized] company in Portugal, to be treated like this and to jeopardize 230 people in the company and to explain to them why we don’t have conditions to improve their lives here."

Written by Aaron Bauer

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