COSTS
A study by the University of Sao Paulo estimated that the infrastructure outlays in Brazil devoted to hosting the 2014 FIFA World Cup and the 2016 Rio Olympics to be approximately $ 18b and $ 15b respectively, hence the resulting total outlay of $ 33b. This is huge for an emerging market economy. Considering that the expenditure for the FIFA World Cup 2010 in South Africa was $ 3.5b, over twice the initial estimate and that for the 2004 Athens Olympics was $ 15b, over 10 times the initial budget. Taking cue from the past, the actual spend can be expected to be much higher than the planned outlay of $ 33b.
As per analyst predictions, indirect investment, such as salaries that return to the economy, the estimate is of approximately $ 54b for the FIFA World Cup and $ 43b for 2016 Rio Olympics. Of these, 42 % of the investment would come from the public sector and 58 % from the private.
BENEFITS For 2008 Beijing Olympics, over a $ 1b was invested on transportation projects like developing Beijing ' s subway system, rail system and construction of hundreds of kilometers of roads in and around the city. A new airport terminal was also constructed. Huge inflows of investment to prepare the nation for the event created a crucial ripple effect on economic growth.
2012 London Olympics are expected to increase economic output until 2015 by approximately $ 2b per year and create 17900 jobs every year. The games are expected to provide economic benefit that would constitute not less than 3.5 % of the total growth expected in the national economy from 2013 to 2015.
Ministry of Sport, Brazil, claims that 120000 jobs will be created per year by the work being done to prepare the nation for the two mega events. Furthermore, according to University of Sao Paolo, the overall economic impact of the 2016 Rio Olympics is to be over $ 50b. As per a study by Ernst & Young, the overall impact of the 2014 FIFA World Cup is to be around $ 70b. The overall benefit of over $ 120b expected in economic profit from both the events. This figure seems very optimistic and being from different sources may include several overlaps. Nevertheless there would be huge impact on several key sectors of the Brazilian economy.
This investment would mostly cater to pressing need of development of infrastructure in Brazil. Large proportions of the budgeted expenditure are allocated for development of inter-city and intra-city roadways, airports and hotels. As of 2011, a meager 14 % of the roads in the entire country are paved.
Tourism is expected to receive a major boost in the entire
Brazil, especially Rio. The number of visitors to Rio is expected to more than double to over 3 billion by 2016. About 12000 new rooms are expected to be completed by 2016 in Rio. Other industries that will, be directly benefited include the construction, electricity and telecommunication industry.
The advantages from hosting events of such magnitude cannot be taken for granted. Historically several host nations have failed to enjoy the dividends of the investing in organization of such events. Japan spent about $ 4b for FIFA World Cup 2002, mostly on infrastructure programs but all the spending barely made any positive difference to its sluggish economy. Similarly the number of tourists which were expected in Sydney after it hosted the 2000 Olympics barely saw any change. Other arguments made by the skeptics are that there is almost no long term employment benefits associated with such sporting mega events. Also the large sporting capacity often lies underused and ruinously expensive to maintain, as in the case of 2004 Athens Olympics. Out of the 24 stadia, 21 stadia, arena and other sporting facilities built for the games are mostly in ruins. Also, in months after the games tens of thousands lost jobs in the Greek construction industry.
However this may be very different for Brazil which has huge population and severe backwardness of infrastructure and quality human resource. The measures that will be taken to develop the facilities and services for the events will kick start the much needed growth in spending on infrastructure and will not be contained only till sporting facilities. Development of airports, roadways and ports will ensure employment of huge number of locals not only during construction but also for decades through services offered by these necessities of a powerful economy.
The 2014 FIFA World Cup and the 2016 Rio Olympics demand huge investments in infrastructure in Brazil and will be the drivers of growth and are the best hope Brazilian economy has to break the deadlock of high interest rates, expensive domestic currency and high inflation. With improved, more efficient infrastructure and global acclaim Brazil can be expected to attract a lot more investments not only in the commodity markets but in industries that will provide sustainable growth and holistic development of the Brazilian economy.
CONCLUSION
Brazil could not have expected a better opportunity to invigorate its economic growth. The facilities required for successful conduction of such events will force Brazil to shed all the inertia and invest in developing world class infrastructure to salvage national respect. The megaevents will provide the right platform for Brazil to experiment and break from its low growth trend. The
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