By Bruno De Nicola, Contributing Reporter
RIO DE JANEIRO – The election of Rio de Janeiro as host city for the 2016 Olympic Games is expected to cause a sharp increase in foreign investment in the country. An Olympic Games Committee survey carried out by Credit Suisse estimates a R$30 Billion financial input over the next seven years. The Brazilian Ministry of Sport however, foresees an overall fund injection of around R$90 Billion, taking into account indirect investments and their long-term effects.
After September 1997, when Sydney was announced as host for the 2000 Olympic Games, the construction, transportation and communication sectors registered an extra five percent increase in the Australian GDP. The largest sporting event in the world is predicted to exert such a strong influence over many Brazilian investors and workers’ lives too. The Gringo Times took a close look at the Ministry of Sport’s study, in order to explore the economic impact of the much anticipated ‘Brazilian Games’.
The estimated impact on the Brazilian Produto Interno Bruto (PIB, or Gross Domestic Product) from 2009 to 2016 stands at approximately US$11 Billion. Furthermore, between 2017 and 2027 estimations are of US$13.5 Billion.
The Ministry’s study was developed by the Fundação Instituto de Administração (FIA or Business Management Foundation), and it is based on the value of US$14.4 Billion (R$28.8 Billion), that represents the amount of money requested by the Rio de Janeiro Olympic Nomination Dossier.
According to the study, the huge financial injection will benefit several different entities: US$2.8 Billion (R$5.6 billion) will fund the structure of the Brazilian Olympic Committee, the organizers of the Games, and the remaining US$11.6 Billion (R$23.2 Billion) will finance public and private entities for the construction and repairs of Olympic Games infrastructures such as stadiums, sports pitches, water sports venues and also roads and subway stations.
The study also claims that the input of US$14.4 Billion for the Olympic Games’ preparations will generate a 4.26 production multiplier, which will inject US$51.1 Billion (R$102.2 Billion) into the Brazilian economy from 2009 to 2027. This means that for each US Dollar invested in the organization of the Olympic Games, private entities will invest US$3.26 in production chains related to the event.
There have been thus far 55 sectors identified within the Brazilian economy which will benefit from the preparation of the mega-event. Those that will reap the biggest gains are the construction sector, which will increase by 10.5 percent, followed by real estate (6.3 percent), then services (5.7 percent), oil and gas (5.1 percent), transportation and communications (4.8 percent).
Flávio Lemos, lecturer in Economics at the Fundação Getulio Vargas (Getulio Vargas Foundation) believes that “this is a great chance for the construction businesses operating in Rio de Janeiro; the price of real estate is already growing and the demand for better urbanization will generate great activity to the city, which will have to grow rapidly in order to fulfill residential and commercial needs in the near future”.