Now that 2012 London Olympics are over, the
focus is on Brazil - one of the fastest growing economies in the world.
Like many emerging nations, Brazil has been handicapped by a lack of
essential infrastructure - roads, railways, airports and marinas.
Expectations of costs and
benefits
How much will it cost? A study by
University of Sao Paulo estimated the infrastructure outlays in Brazil ahead of
the 2014 World Cup to be roughly USD 18bn, with USD 14bn coming from Brazilian
taxpayers’ pockets. The expected outlays devoted to hosting the Olympics are an
additional USD 15bn, resulting in a total outlay of USD 33bn for both sport
events. This is large compared to other recent Olympics spending, as chart 2
shows.
But there will, of course, be benefits.
Brazil’s Ministry of Sports – not exactly an independent source – claims120,000
jobs will be created pr. year by the preparations for the two big sports
events. Which is not bad!
Extracting a few more figures: according to a
survey conducted by University of Sao Paulo, the overall gross economic impact
of 2016 Olympics is expected to be USD 51.1bn. Furthermore, according to
a study by Ernst & Young, the overall impact of the 2014 World Cup impact
is expected to be USD 70bn from both direct and indirect investments.
That is a total of more than USD 120bn in gross economic impact from hosting
the two events.
That seems EXTREMELY optimistic I must
say! I would therefore be careful taking the total cost of USD 32bn and
total benefit of USD 120bn as the holy truth. In the past we have seen the
benefit being significantly overly estimated, while the cost similarly been way
beyond budgets.
Infrastructure and growth
Brazil’s president Dilma Roussef recently
announced a commitment to spend USD 66bn on longer term infrastructure
projects. The
plan has a 15-year time frame, so it’s not all about getting ready for the two
big sporting events. Nevertheless, such a commitment to infrastructure
improvements sends a strong signal that Brazil is ready to splash some cash catering
for its future economic growth.
Which industries will benefit the
most?
Leading up to, during and in between the two
events, tourism is expected to increase drastically, mainly within Rio de
Janeiro. Rio is already established as a popular tourist destination, with more
than 1.4m visitors each year. Adding the two events, tourism is expected to
more than double to 3.3bn visitors every year. These are massive volumes, and
will surely benefit the local hotel and retail industry.
Other industries that will surely benefit are
the construction and electricity industries. These industries will mostly
benefit in the periods leading up to the events, whereas the tourist-related
industries will see most gains during the actual events.
In addition to those mentioned above, the
telecommunication sector, along with IT and transportation will surely benefit
from job creation and higher demand from
