51吃瓜

Can聽the Olympic Games help Brazil through its economic problems?

As many sporting fans await the start of the Olympics, it is hardly an understatement that the host country, Brazil, faces a number of economic and political challenges. Some of the many problems include an ailing economy and an uncertain political situation. Other countries have also seen their share of problems leading up to the Olympics, from the Russian team鈥檚 doping聽聽to Pakistan鈥檚 dire state of its sporting聽. Yet, as Brazil lurches from one聽聽to another, it remains to be seen if the Olympics will help the country overcome its problems.

notes that Brazil enjoyed a period of economic聽growth聽of 2.2% year-on-year average from 2011 to 2014. Between 2002-2008, the country experienced an average GDP year-on-year growth rate of 3.5%. The article also noted that Brazil鈥檚 unemployment rate even dipped below 5% for most of 2014. This was reflected by the National Index of Consumer Expectation as the statistic聽remained聽above 100 from 2008 until early 2015鈥攁 number above 100 indicates increasing confidence. According to , the consumer expectation measure 鈥渇ocuses on consumer鈥檚 current financial situation and on expectations about inflation, unemployment, wages and major purchases for the next 6 months.鈥�

Economic and Political Malaise

These statistics seem to paint a rosy picture. However, Brazil has faced a number of severe problems that have compounded over the past five years. The fall in the commodity markets is聽especially painful for Brazil, considering that its commodity exports聽聽more than 50% of total exports. From 2000 to 2013, China’s annual聽聽with Brazil grew from $2 billion to $83 billion. Yet, as China grapples with its economic restructuring, Brazil suffered as commodity prices saw a sharp downturn.

These external problems were furthered by what John Lyons and Paul Kiernan of The New York Times 丑补惫别听聽as the 鈥渞esource curse.鈥� Countries with abundant resources will benefit from great booms, but will inevitably fall into a trap of economic mismanagement and overvalued currencies.聽The 聽supports聽this, noting聽that Brazil has structural weaknesses ranging from poor infrastructure to a considerable informal sector. Such structural problems inevitably weigh on the economy, with the 聽by 3.8% in 2015.聽聽has now reached 8.84% in June year-on-year鈥攃onsiderably higher than the government-set target of 4.5%. The high inflation has forced the Central Bank to keep its聽聽interest rates of 14.25%.

The Transparency International corruption perception index allocates a score of 100 to a 鈥渃lean鈥� country, while zero indicates the most corrupt. From 2014 to 2015, Brazil saw its score聽fall聽from 43 to 38.

With all these problems, Brazil鈥檚 credit rating has been reduced to junk聽聽by Moody鈥檚 Investors Service, S&P and Fitch. With growing government debt and increasing interest payments, Brazil鈥檚 interim president, Michel Temer, will look to聽聽government spending.

As Brazil tries to put its economy together, the country still faces political difficulties. High-profile聽聽clean-ups have implicated the oil giant, Petrobas, and several politicians. Suspended President Dilma Rousseff is currently undergoing an 听蹿辞谤听聽the budget in her favor. The Transparency International corruption perception index allocates a score of 100 to a 鈥渃lean鈥� country, while zero indicates the most corrupt. From 2014 to 2015, Brazil saw its score聽聽from 43 to 38.

Olympic Promise

With Brazil鈥檚 economy reeling, it is a wonder if the Olympics will be the boon that the country needs. Other than the sporting marvel that will come to Rio de Janeiro, the host city, there are some economic benefits. Around 350,000 tourists are聽聽to come and view both the Olympics and Paralympics, which means that there will be an increase in consumer spending. With an uptick in consumption of goods and services, this could translate to increased employment to serve the swell in tourism.

Kevin Daly, from Goldman Sachs,聽聽about the London聽2012 Olympics that there are longer-term benefits 鈥渟uch as the promotion of London and the UK as a tourist venues and as a potential location for investment.鈥� Within the same report, Daly also mentioned that London may not accrue as many longer-term promotional benefits from its time hosting the Olympics because it is already known for tourism. The same could be said for聽.

The city could also benefit from increased investment that may not only boost the infrastructure for sporting events, but to also improve transportation and other venues. Indeed, Moody鈥檚 has聽聽that there will be benefits from the $7.1 billion investment in the city鈥檚 infrastructure such as metro advances.

Investments such as these could be utilized in the future鈥攍est they become 鈥渨hite elephants鈥濃�攁s Goldman Sachs economists Yu Song and Michael Buchanan stated in a聽聽on the Beijing Olympics that “more than 90% of the total investment for the games was in telecommunications, transportation and utilities 鈥� and most of this has been fully utilized since.鈥� The positives from increased investments in Rio have also brought forth controversies through 聽and the fact that the has already been聽exceeded聽by 51%.

Yet, there are other factors that cannot be measured鈥攆rom the promotion of the host country鈥檚 culture to the pride that comes from hosting the Olympics鈥攁s suggested by sports scientist聽. Daly, Song and Buchanan mention other benefits of promoting sport as well as healthy lifestyles and even increased environmental awareness鈥攖he final point specifically benefited Beijing.

Tim Toohey, researcher from Goldman Sachs,聽聽that 鈥渄efining feature of whether the London Games provides a better economic return than the Sydney Games could well be the high degree of slack in the UK economy.鈥澛犅爎efers to the amount of resources, which includes labor and capital that are currently unemployed. Brazil does face an unemployment聽聽of 11.2%. While labor and capital can be employed to help during the Olympics鈥攚hether it would be transitional use or not鈥攖he structural problems still remain.

In order for Brazil to benefit from the Olympic potential, it will have to rein in corruption and get rid of the uncertainty in the political system. It should also reduce its dependency on commodity exports so as to not be susceptible to adverse changes in prices.聽With so much uncertainty in the economic and political realms, it may be best to simply enjoy the sporting marvel that the Olympics promises to be.

The views expressed in this article are the author鈥檚 own and do not necessarily reflect 51吃瓜鈥檚 editorial policy.

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