On the eve of Tuesday's events to mark the 500-day countdown to the starting gun in August 2016, Paes admitted the Guanabara Bay will not be as clean as authorities had promised.
"I think it is a lost opportunity, yes," he told Sportv in an interview. "Not for the Olympics but for Rio, it's important to Rio. De-polluting the Guanabara Bay is something we should have done."
"It's a shame that the Olympics were not the reason or the motive, as in Sydney, to resolve the issue once and for all."
However, Paes said he did not believe the dirty waters would pose a risk for sailors.
The sailing events will take place in a relatively clean part of the bay and as it is the dry season, there will be less water flowing into the bay from the five rivers that surround it, he said.
In addition, staff will be employed to keep flotsam and jetsam away from the boats.
"You have people there collecting solid waste so it doesn't affect the Olympics," Paes said.
"So I don't see it as a problem for the Olympics. It wasn't for the test event we held last year."
The cleaning of Guanabara Bay was a key part of Rio's bid pledge and has long been a goal of successive local governments.
Hundreds of millions of dollars have already been spent but the water remains fetid, with Olympic sailors who visited the city for test events complaining of floating sofas and animal carcasses in the water.
When it bid to host the 2016 Olympic Games, Rio de Janeiro said it would cut the amount of raw sewage flowing into the bay by 80 percent but has since admitted that is unlikely.
Biologists last year said rivers leading into the bay contained a superbacteria that is resistant to antibiotics and can urinary, gastrointestinal and pulmonary infections.
(Reporting by Andrew Downie; editing by Martyn Herman)
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