Are the Rio Olympics really going to benefit the economy?

One of the most common criticisms of the summer Olympics is the event seems to generate more problems than it solves for the host country; particularly for the economy.

This weekend, the two week event kicked off in Brazil’s Rio de Janeiro, and the debate about the Olympics’ economic impact was particularly strong, given the country’s fragile economy and the ever-widening disparity between the cities rich and poorer populations.

Although the Olympics generate income through ticket sales and increased tourism, they also bring with them hefty investment costs, which many feel outweigh the economics benefits.

Social benefits also include new facilities and improved infrastructure, however these come at a significant economic cost – which some feel would be better spent reducing the disparity in wealth in Rio’s capital city.

In the year that followed Rio securing the hosting rights to the 2016 Olympics, Brazil’s Bovespa Index gained 14.8%. However recently, BBI has been hobbled by commodity price weakness and a deep recession, while inflation has forced the local central bank to increase interest rates to 14.25% – a nine year high.

All hope is not lost for Brazil’s economy though, if previous Olympics are anything to go by.  Following the London Olympics here in the UK in 2012, the stock market and reports in the following year suggested that trade and investment had received a £9.9bn boost from the event. The public remains divided on whether the financial benefits of the Olypmics ever outweigh the costs – in the case of Rio, we’ll have to wait and see.

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