A chill wind greets the Winter Games

Vancouver looks like the perfect Olympic host city, but behind the pristine image lies an urban decay and deprivation that threatens to unleash a wave of protests

In the basement of a flophouse hotel in Vancouver's Downtown Eastside, mischief is hidden in a stack of plain cardboard cartons. Before long, its instigators will unleash it on the Winter Olympics, which begin today; for now, though, the stunt remains top secret. Or nearly. My guide unseals one of the cartons to produce a mysterious blanket, rolled and packaged in cellophane. He hands it over with a conspiratorial smile. "Keep it," he says.

The blanket, apparently official merchandise, is embossed with the five rings and Inuit figure that represent the Games, which kick off tonight with a lavish opening ceremony a few blocks from this clandestine cellar. It even features a sticker with a personal message from the Canadian Prime Minister Stephen Harper. But there is something – I am honour bound not to reveal what – a little subversive about these blankets. They are not meant to flatter Mr Harper, a conservative, or celebrate any of his social policies, but rather the reverse.

It is no surprise that you will not find these on souvenir stalls. The "2010 Homelessness Blankets – An Olympic Legacy" were made and packaged in secret, in deliberate violation of the IOC trademarks, and are destined to serve as props in one of the scores of political protests that are set to erupt across Vancouver as the Games begin.

While there is whimsy in the stunt, should its (anonymous) plotters successfully carry it off, other events planned for the coming days in Vancouver will speak much more bluntly of anger at the government, at big corporations and globalisation: and, above all, the Olympics themselves, at a broken promise that the games would also fix the city. Any one of these happenings, perhaps the Heart Attack Rally on Monday – "to clog the arteries of capitalism", an activist explains – could trigger clashes of a kind the International Olympic Committee, which spares no effort in controlling what you and I see of the Games, will not have experienced before.

"I am worried there is going to be a major confrontation," warns David Eby at the British Columbia Civil Liberties Association, who has spearheaded efforts to encourage the police to go gently on any protests in the next two weeks. Political rallies are nothing new for Vancouver, but because of the strict restrictions placed by the IOC on any host city – it's London next – the police may not behave normally.

"If the police try to block people just walking in the streets, they will see a response, because we are going to walk in our streets," warns Harsha Walia, a women's rights activist and an organiser of some of the planned rallies, the aim of which will be to "disrupt business as usual". She is taking a break in the Waves coffee shop just off West Hastings, the avenue through the heart of the Downtown Eastside, and where, on a mild February afternoon, the homeless and residents of the single-room-occupancy hostels crowd the pavements, everyone looking for their next dollar or their next fix. Ms Walia also sees the potential for violence, noting the scale of the security measures for these games, with a budget that has ballooned to C$900m (£545m). While much is for terror prevention, the authorities have not hidden their concern about political agitators. Surveillance of Walia and co has been overt. "What are the 14,800 military, security and police personnel out there for unless it is to protect the Olympic brand?" she asks. "We are not a threat to the public, but we do intend to do harm to the Olympics industry."

This was not the kind of distraction the IOC expected when it picked Vancouver in 2003. The city is honoured as one of the world's most liveable. It helped that in crafting its bid the city stressed its aboriginal heritage: hence the Inuit symbol on the logo and the Indian-themed exhibits around Vancouver. Their only real worry was the unreliability of snow at nearby Cypress Mountain, a competition venue.

You can hide the effects of Mother Nature, it turns out, by moving snow with helicopters and lorries from the top of the mountain to the bottom (from Heaven to Earth). But as the organising committee, Vanoc, is discovering to its chagrin, you can't hide the Skid Row made up by the 15-odd blocks of the Downtown Eastside. A short walk from those shinier parts of Vancouver, this is sometimes called the poorest postal code in Canada. The urine puddles, sunken cheeks, empty gums and grizzled chins shock those not accustomed to seeing poverty in such concentration.

What galls Walia and everyone else who will be marching soon is that in accepting the Games, Vancouver pledged to fix the blight of Downtown Eastside and the poverty that crowds every squalid corner of it. These were not just the Green Games but also the Socially Responsible Games. Among the promises: to build more housing for the very poor to give them a chance at leading ordinary, secure lives. By the city's own admission, many of those goals have been missed. Walia is not surprised. "There is a history of duplicity around the Olympic Games and there was no reason to believe Vancouver would be different," she says.

The plight of the Downtown Eastside is an extremely sore subject for Canadians for other reasons too. An estimated 30 per cent of the homeless here are aboriginal. It has the largest off-reservation aboriginal population in Canada. There is also the tragedy of the "missing and murdered women" from the area, who resort to the sex industry to survive but vanish. Officially, there are 69 missing women from Downtown Eastside but the real number may be higher. Many are indigenous.

Mark Townsend, a Londoner, runs Insite, the only supervised injection facility in North America. He and a colleague, Russ Maynard, are proud to show an outsider around. We linger in the injection area, where upwards of 800 people will come on an average day to shoot up heroin or other substances, like crack cocaine dissolved in liquid, under the supervision of volunteer nurses. Among them today is a woman boasting a fancy bag branded by Burton, the snowboard company doubtless as hungry for medals this weekend as she is for her fix right now.

We later go upstairs where just eight beds are available for those willing to detox, a harsh process than can take eight days. Each resident has a room with en-suite bath. "If we were a candy store, I would be nuts not to want to expand into next door and across the street," says Maynard, who wears a black T-shirt with the message, Insite Saves Lives, which it does. An addict who stops breathing in an alley of Downtown Eastside is a dead addict. In here, they might be revived.

Townsend, 48, has his own issues with the Harper government, which has twice attempted – and failed – to use the courts to close Insite down. But he doesn't buy all the arguments of those planning to protest at the Games: for example, that the spots of gentrification now visible in the neigh-bourhood are a bad thing, or that they have happened because of the Olympics. His organisation has in fact been involved in converting an abandoned department store in the area, Woodwards, into mixed-income housing, with some homes for the poor and some market-rate apartments.

But mention social housing and Harper in the same sentence and Townsend gets more radical. "Canada's Olympic shame is that we have a Prime Minister who does not support a national housing policy. There ain't one," he says. "If they don't believe in housing for the poor, for the mentally ill or the plain very difficult, then these people will be on your streets and no one should be surprised."

Just west of here in Gastown, a favourite area with tourists, Grand Chief Stewart Philip, the President of the Union of British Columbian Indian Chiefs, fairly boils as he contemplates the start of the Games. He remembers how Vancouver gave its original bid a special flavouring of the region's indigenous culture and sees how Vanoc is doing much the same thing with the staging of the Games now. "It's a gross distortion of the terrible reality in relation to the crushing poverty of the indigenous peoples," he argues, complaining about the "wilful and deliberate Disneyesque marketing campaign that would suggest that we enjoy a very decent standard of living... when that is not the case at all."

Stella August, a Nuuchahnulth Indian, who fled her foster home at 13 to work on fishing boats until she settled in Downtown Eastside more than 40 years ago, expresses a simple emotion about these Winter Olympics shared by many. How can the government spend billions on this sporting circus when there is so much suffering on the streets? "I am disgusted when I look at all the money they are spending," she says, adjusting herself on the motorised scooter. A sticker on a wing mirror reads: "No Olympics on Stolen Native Land." She goes on: "They should have just forgotten about the Olympics and looked after our own people. This never should have happened in such a beautiful country."

And it is precisely that – the uncomfortable conflict between the country's brand image and the social realities of people like Stella and the visible blight of the Downtown Eastside – that motivates Harsha Walia. "We want to disrupt the myth of a country that cares about its residents, that cares about its native peoples and of a country committed to peacekeeping. We want to disrupt the myth that this is a liberal counterweight to the US." She adds: "We want to embarrass Canada."

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