But Olympics historically LOSE money and historically have large cost overages. I am sure the Russians are looking at those Athens, London, and Beijing cost figures very closely. They are already proposing absolutely unprecedented spending for a Winter Olympics.

Let’s remember, Winter games are much smaller than the Summer games, with correspondingly smaller budgets and attendance. And yet, Russia is already proposing infrastructure spending in Sochi on a scale with SUMMER games in the previously mentioned nations.

The Olympics are great for Russian pride and will pour unprecedented billions into the Sochi region. It instantly becomes one of the largest public works projects in the world.

But the vast majority of people who are going to benefit financially are those who are already wealthy. Those who are already planning large ski resorts in Krasnaya Polyana, those who already own and are developing hotels, etc. in the region. There will be some trickle-down, sure – but lets not pretend that some cronyism isn’t at work here (hardly unique to Russia, by the way).

As I point out, Putin is already telling Chaika to control spending. There are numerous other news articles, in Russian and English, discussing the Sochi Olympics and the role of corruption, organized crime, and increasing construction costs in the region.

The topic of the future of the Russian economy is for another day. While Russia certainly has many assests, in terms of people and natural resources, it has many hinderances to growth as well (I was looking at a Levada poll last night, where Russians cite corruption and bureaucracy as the two biggest hinderances to economic growth, for example). Most recent analysts that I have read discuss a real estate bubble in areas of Russia. Inflation has been a continuing concern as well, despite rosy forecasts, recent inflation figures jumped considerably and the Russian government admitted they won’t achieve their low inflation goals for this year.

But I also think that the growth we have seen in Russian economy for the past seven years will be nothing compared to what we will see in the next seven. Everyone has already figured out that it’s now beyond oil and gas prices (although they will help too).

And just to add to my point above RE: why these foreign tourists will come to Russia. During the Turin Olympic Games all of the foreign athletes partied at the Russia House after winning a medal. Russian team apparel was the most popular. The bottom line is that the young people of the world (excluding Poland and Baltics) basically love Russia. Because it is so mysterious. Because it is so different in every way. Because it has such a virtuous history. So, they will come to Sochi.

Russia is doing well with revenues, but they are spending it even faster.

There are plenty of rich Europeans, Arabs, Indians, and of course Russians in Sochi’s perimeter (say a short plane ride) that Sochi will explode as a tourist destination when all the development is completed IMO.

I actually think that Canada learned quite a good bit in Calgary about hosting an Olympics and how to manage costs. But as you point out, the laws of supply and demand require that construction prices will become inflationary for projects this large. So while a 23% increase is modest compared to industry wide construct cost increases, it still is a cost increase – something planners of future Olympics would do well to remember.

In fact, I would say that if the costs for Sochi only increase 23%, the Russians will have done very well. The bill for the Athens Olympics became almost 6x greater than the initial estimates.

Actually, people are notorious for comparing apples and oranges. The C$1.7 billion is the operations budget, and that money is raised from corporate interests (TV broadcasters, corporate sponsors, souvenier licensing, ticket sales…). It’s for actually running the Games.

The C$580 million (correct) is in addition to that. It’s the construction — or capital — budget for the 2010 Games, 50% of which comes from BC taxpayers, 50% from national taxpayers (because, after all, we taxpayers get to keep the facilites for decades after the Games are gone).

That budget is administered and spent by VANOC, the organizing committee, but its expenditure is supervised by the governments, audited by the governments, and it’s accounted for separately from VANOC’s operations budget.

Costs are up because after several years of downturn in Western Canada, we’re currently undergoing a capital construction boom that began, right on time, with or without the Olympics coming to Vancouver.

There is something like $100 billion of major-project spending underway in BC at the moment, sucking every spare rebar, pound of concrete and labourer there is to be had. Basic laws of economics kicked in and prices went up. Construction inflation since 2002, when the VANOC bid was done, has risen in this area about 40%.

VANOC wasn’t responsible for that — it’s captial expenditures were something like half of one percent of the construction boom, and that’s not a sufficiently big tail to wag the dog. And it said at the time it presented its bid that the IOC rules prevented it from reporting predictions of inflation (for good reason), but that it expected its cost of cosntruction to rise by the time the facilities were actually built.

So it was able to keep its capital costs from increasing only half (or so) of what the industry was experiencing. That’s pretty good management, I’d say.

I’m not affiliated with VANOC, so I can’t speak for it, nor any other organizing committee, and I know you were trying to make a point, but generalities that give the wrong impression need somebody to say something, somtimes.