Rio World Cup and Olympic Legacy: Economics

By Helen Trouten Torres, Contributing Reporter

RIO DE JANEIRO, BRAZIL – It may be no coincidence that recent mega-events have been awarded to countries with developing economies; the 2008 Beijing Olympics and 2010 World Cup in South Africa were both hosted by BRICS. The events are capable of generating unique enthusiasm in a worldwide audience and present lucrative financial opportunities and have become an imperative for nations trying to attract international investment.

The 2016 Olympic Games attracts major multinational sponsors like GE announced in August, Rio de Janeiro, Brazil, News

The 2016 Olympic Games attracts major multinational sponsors like GE in August, photo by Rio 2016.

Recently, The Rio Times reported on the expected 2014 World Cup and 2016 Olympics legacy for the city and country in terms of infastructure. In the second part of this series, we now turn our attention to the predicted legacy of the mega-events on the Brazilian economy.

Rio 2016 spokesman Bernardo Domingues explains, “The expected gross economic impact of the 2016 Games on the Brazilian economy is US$51.1 billion, according to a University of São Paulo study commissioned by the Ministry of Sport in 2009.”

Bruno Reis, Managing Director of Exclusive Analysis’s Brazil office, pegs the World Cup figure even higher, stating “The 2014 World Cup will involve R$142.39 billion of investments in Brazil, of this, direct investment between 2010-2014 will be R$29.6 billion.”

Reis breaks those numbers down to: “42 percent will come from the public sector and 58 percent from the private sector…As regards indirect investment, such as salaries that return to the economy, the estimate is R$112.7 billion.”

For Rio’s Olympic’s legacy on Brazil, Reis estimates direct investment at approximately R$30 billion between 2009-2016, with indirect investment estimated at R$90 billion.

There are high hopes in terms of employment rates. Sectors related to tourism, construction, electricity, IT, telecom, creative industries and financial services are the sectors that will see the most job creation, says Exclusive Analysis’s Brazil office. Around 120,000 jobs per year are expected to be created as a consequence of the Games until 2016, and then a further 130,000 jobs per year until 2027 according to research by the Ministry of Sport.

There is expected to be a massive boost to the tourism industry as well. According to Embratur, 1.4 million tourists visit Rio every year and this is expected to more than double, increasing to 3.3 million. For Brazil, the goal is to increase the number from 5 to 10 million visitors annually. The World Cup alone is expected to generate R$5.94 billion for the tourism sector according to Reis.

Mayor Eduardo Paes presents figures of Rio hotel chains, photo by Beth Santos/Rio City Hall.

Mayor Eduardo Paes presents figures of Rio hotel chains, photo by Beth Santos/Rio City Hall.

“About 12,000 new rooms are predicted to 2015. 5,400 of them are already under construction. Rio de Janeiro has an extensive agenda of major events happening the next years, culminating with the Olympic Games in 2016,” said Mayor Eduardo Paes.

The Riotur President, Antonio Pedro Figueira de Mello, announced: “We will leave an unprecedented legacy. We are not only enlarging hotel capacity, but we are also attracting new investors to Rio, exciding IOC’s expectation and demands.”

Experts note the economic benefits gained by the organizing committee of the Games through improved practices of public administration, as was reported in Barcelona. While under the World Cup and Olympic spotlight, local and national governments are often forced to take political steps to showcase their strengths and conform to international political pressures.

President Dilma Rousseff already stepped in to put pressure on the World Cup preparations, holding public officials accountable for progress or lack thereof. In Rio, the above mentioned Maracanã Stadium is expected to be ready on time, but at a cost of nearly R$1 billion, approximately fifty percent more than originally estimated.

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