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Economics of Rio Olympics:

Olympics are the largest international sporting event featuring summer and winter sports involving participation
from athletes from all round the globe. A lot of money is spent in organizing an event of such stature as the
Olympics. According to a research conducted by The University of Oxford and Said Business School a summer
Olympics games cost an average of $5.2 bn, while the winter Olympics costs an average of $3.1 bn. It is also
important to understand that almost 50% of Olympics have exceeded their budget by more than 100% since
1960. With such high spending incurred by the countries it is important to understand the economic impact the
Olympics has on the economy of a nation like Brazil, which recently concluded the Olympics of 2016.
Rio 2016 vs Olympic average
Percentage Overrun

Percentage Overrun

Average Cost overruns in major


transportation projects
60%
40%
20%
0%
Roads

Bridges and
Tunnels

Rail

200%
150%
100%
50%
0%
Expected Rio cost Average Cost overrun
overrun
for Olympic games

Source: The Oxford Olympic 2016

Brazilian economy is facing its worst recession in decades; swelling unemployment, double-digit inflation and a
corruption scandal that saw the sinking of the state oil company. Also Unemployment in Brazilian cities has
reached 8% and the economy is predicted to shrink by more than two percent in 2016. Brazil entered the games
amidst recession and political turmoil. Looking at Rio a city already struggling with inequality and violent crime
the negative impact of the Olympics cannot be ignored.
In such a situation Brazil has incurred high capital expenditure for the Olympics; however the revenue it will be
able to generate from the Olympics is uncertain. The major source of revenue is TV broadcasting rights, which
contribute to the major chunk of the expected revenue. Attractive sponsorships also are expected to contribute
roughly 20% of expected revenues apart from boost in tourism and related sectors. It is also interesting to note,
in the recently organized the 2014 football world cup spending added up to $11 billion to build an image of
Happiness and receptivity to enhance its tourism sector. They had incurred the highest amount ever to organize
the world cup; however the flow of tourist has been flat since the event, according to various tour operators. The
main reason for the same being that though Brazil has attractions it doesnt have competitive prices and
infrastructure to meet the demand of the international tourists. Brazil will also have to deal with the Zika Virus to
ensure that visitors feel safe to visit the country. Another issue with Brazil is liberalization of the visa norms, so
that the tourists are motivated to visit the nation.
Olympics is also not well received by the locals of Rio, 385 families had to relocate their homes due to building of
a high speed lane which connected the airport to one of the sport facilities. Brazilian officials should have
strengthened their relationship with local communities if they wanted businesses to contribute to the Olympics
predicted revenue which if successful could have supported the countrys failing economy.
With high capital costs incurred and cost overruns in the Rio Olympics budget, complimented with infrastructure
problems, it is highly likely that a flat rate of tourist inflow would repeat in Brazil, leading to lower revenues,
thus leading to the increase in the time to break even, thus the Olympics are proving to be an economic burden.

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