The impact of the Rio Games is likely to be affected by the recession that hit it in 2015. Last year, the Brazilian economy shrank by 3.8% 9 as a consequence of the deterioration of its mining industry. With an unstable Brazilian economy comes instability in terms of internal social cohesion which can be shown by the protests which took place in response to the corruption of the Brazilian World Cup in 2014 and which are currently taking place over the Rio Games. Many in the country argue that the money going towards the Games could be used for public spending. To exacerbate the current socio-economic turmoil Brazil faces, the build up to the Games looks likely to result in increases in taxation to Brazilian citizens and a cut in public spending. This not only has negative social consequences on an already disgruntled Brazilian public but also economically: Brazil’s aggregate demand will see decreases and therefore affect the economic growth of the nation. That said, Brazil will also see a large increase in aggregate demand in terms of investment into the country as well as an increase in consumption as a result of increased tourism and it is likely that these increases will cancel out the losses from higher taxation. In terms of the positives that the Games could yield for Brazil, it primarily looked as if the Olympics could be very promising for the Brazilian economy. It is clear to see how the Olympics can be very beneficial for a nation, as demonstrated by the estimated £9.9bn boost in trade and investment 10 the UK saw after hosting the 2012 Games. Furthermore, it is estimated that from the Rio Games the Brazilian economy will see a ‘multiplier; of 4.26’ 11 . One can infer from this that the Brazilian economy, which was already considered a rapidly growing economy, would see a large boost in its economic growth as for every dollar invested into its economy, would now be ‘multiplied’ leading to an overall increase in output of over four times its size. While this may have seemed beneficial for Brazilian citizens, it is likely that much of the profit generated from the Games would actually revert to shareholders and investors 12 and so it is clear how some social divisions have already been triggered by the economic implications of the Games. Moreover, a study which was carried out by the Institute of Administration states that Brazil is likely to see increased production, expansion of the service sector, more tax revenue and growth in jobs and wages as well as an impact of R$ 102 billion 13 as a result of the Games. In summary, it can be deduced that whilst Brazil has many socio-economic obstacles to overcome, in terms of social unrest and the current low growth rate it faces in order for the games to run smoothly. However, the Olympics will be hugely beneficial for the nation and arguably is very well timed as the positive reactions mentioned above could be extremely favourable to Brazil’s many new redundancies. Therefore one might predict that the economic implications for the Rio Olympics look fairly favourable for a currently rocky Brazilian economy.
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9 http://money.cnn.com/2016/03/03/news/economy/brazil-recession-lower-middle-class/ 10 http://www.bbc.co.uk/news/uk-23370270 11 http://sevenpillarsinstitute.org/case-studies/financing-ethics-and-the-brazilian-olympics 12 http://sevenpillarsinstitute.org/case-studies/financing-ethics-and-the-brazilian-olympics 13 https://www.rio2016.com/en/news/rio-2016-will-generate-a-positive-socio-economic-impact-in-brazil
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