NO DEAL Brazil currency tumbles. Olympic ticket prices remain high
Posted on 10/02/2015 | About Brazil
Some foreign ticket buyers for next year's Olympics are paying higher prices than they should, failing to benefit from the steep decline in the value of the Brazilian currency against the dollar.
Rio de Janeiro organizers reached an agreement a year ago with official ticket resellers outside Brazil to an exchange rate of 2.35 Brazilian reals to the US dollar. Since then, the value of the Brazilian currency has plunged about 70 percent. The current exchange is roughly 4.00 reals to the dollar, meaning that people paying with dollars should find some bargains. But they're not. The fixed-exchange rate is staying put.
Brazil's currency collapse is creating havoc for local organizers, one of many financial woes besetting the Olympics that open in 10 months. Brazil's inflation is running at 10 percent, and the economy is expected to remain in a steep recession through the games. There are calls to impeach President Dilma Rousseff, partly driven by a $2 billion bribery scandal involving state-run oil company Petrobras. Local organizers are cutting costs in a tight operating budget, and they've declined to adjust the exchange rate for tickets, which would slash income.
“To balance revenues with expenditures, the (organizing) committee cannot be exposed to exchange-rate risk,” Donovan Ferreti, director of ticket sales for the Rio Games, said in an email to The Associated Press. “Therefore the payment solution is based on a fixed-exchange rate.” Ferreti said ticket sales make up 16.2 percent of Rio's revenues, the third largest source of income for the 7.4 billion real (US$1.9 billion) operating budget. This is the budget for running the games themselves and excludes a capital budget for building venues, subway lines and highways.
Other operating income is from local sponsorships, merchandising and licensing, with a large contribution from the International Olympic Committee. “We are cutting. This is a reality,” Mario Andrada, spokesman for Rio organizers, told AP. “Look at the country. We have to be cautious.” Patrick Sandusky, spokesman for the United States Olympic Committee, said the USOC must buy tickets for its athletes at the 2.35 exchange. Sandusky said American athletes are given two tickets to each event in which they compete. Three years ago in London that amounted to 4,000 tickets.
“In the planning process for the games a decision was made to purchase the tickets in dollars so that we can better plan what our budget will be for the games,” Sandusky told AP. He said the exchange rate may be poor, but it was certain and “eliminated the risk” of unforeseen changes. Rio organizers have allocated 2.25 million tickets for sale internationally, about 30 percent of the 7.5 million total. Here are examples of how the exchange rate affects ticket prices.
• A top seat for the men's 100-meter final on Aug. 14 is listed at 1,200 reals on the Rio website. That would be about $510 at the rate of 2.35. However, the price would drop to $300 under the present exchange rate. • The top-priced ticket for the closing ceremony is 3,000 reals. That's about $1,280 at the old rate, but $750 under the current exchange. • The most expensive seat at the Aug. 5 opening ceremony is 4,600 reals - about $1,960 at the old rate, but $1,150 as the present rate. Ticket prices may not matter for those wealthy enough to pay these prices - plus flights and hotel rooms - but they illustrate the impact of the currency gyrations. CoSport, which handles official ticket sales for the US, Canada, Australia, Bulgaria, Britain, Sweden, Norway and Russia, requested an adjustment to reflect the falling value of the real, but was turned down. CoSport, like others resellers, is locked in at a price set by Rio and does not necessarily profit from the poor rate. Some of CoSport's revenue comes from being allowed to collect a 20 percent service charge on ticket sales. Ferreti, the ticket chief for the Rio Games, said exchange rates present a gamble. He said authorized ticket sellers like CoSport were given the option of fixing the contract in dollars or reals. “Some countries like Austria and Germany opted to pay the committee in reals,” Ferreti said. “Others like the United States and Britain decided to pay in dollars with the fixed rate.” There are winners and losers, even before the Olympics begin.