The crowd went wild and the media sensation was noticeable as Rio was officially crowned as the host of the 2016 Olympic Games. Rio de Janeiro, one of Brazil’s major tourism attractions and a poverty and crime struck city; rode a wave of Olympic Committee Sympathy to beat Michelle Obama’s Chicago and Madrid and bring the Olympics to South America for the first time in history. Subsequent to the announcement, the streets and the famous Copa Cabana beach were rightfully painted yellow and green, carnival style and the wild sensation was captured and broadcasted live to millions worldwide. That kind of exposure, is exactly what, the local organizers are hoping that will help the region’s economy. So, will the Olympic Games be a long time financial success story or a another event in history?
Obama - Lost With Chicago
This media’s zealous interest (which you can’t get anywhere else) in the hosting cities, is one of the reasons why cities across the globe, compete so hard to host the games. The Olympics are proven money makers for the hosting cities; generally, the loads of tourists that come a knocking, and the increased economic investment are supposed to cover and then some, the billions of dollars that are needed in order to put on the Olympic gig. Private revenue mostly made from advertising in all media platforms and television broadcasting rights is also something that makes the venue’s planners to drool at night. The Los Angeles 1984’s run for the money, was a great success as American television networks and big time corporate sponsors were psyched to pay a lot of money to place their names in the track lights. The size of the city also meant that not much of building was needed to be done as the city’s resources already could accommodate the events. The games also represent an opportunity for the common people such as renting their homes, providing light entertainment, souvenirs and food.
However, some fear that it is just not enough. Those commercially rosy days are long gone, there has been somewhat of a backlash against commercialism and advertising and many TV companies go all out against charges for rights. Also, in the last few Olympic Games, security and politics related expenditures alone have escalated to the sum that once represented the entire cost of hosting the games. Considering these issues and prior examples, the games might help Rio only to a minimal extent, over the long. Take the case of Salt Lake City (host of the Olympic Winter Games in 2002), which reports now show that the games’ economic influence on the city has been somewhat limited, or Canada, where smokers still pay taxes, on their cigarettes, to finance the games that were held there nearly three decades ago. A big concern, is that usually a large portion of the Olympic revenues, goes to maintaining the sport facilities, which were specially set up for the games and are not so commercially appealing after the Olympic closing ceremony. Moreover, as Greece found out, the staging costs cannot be fully accounted for, at the early time of discussing the Olympic Boosters. The final cost of the Olympics in Athens had risen by nearly 13 billion dollars from their first estimation of $1.3bn. Financial advisers also claim that another issue that needs to be taken into account is the fact that the IOC, or International Olympic Committee and sponsors are there, first and foremost in order to provide for themselves and promote their products and not to support the community. Many also fear that it’s only a temporary boost. Don’t forget that the games last for 17 days only and then fade into memory.
Rio Olympics: Will the Games be a Financial Success Story?
Choosing Rio, the poor city infested with crime and unemployment over the other more glamorous cities serves the organizers’ publicity, but worldwide investors didn’t need the IOC’s announcement in order to focus their attention on Brazil’s economy, they have already noticed it in the midst of the economic crisis. Brazilian bear bonds gave a nice yearly profit of nearly 10%, and Brazil’s economy is considered amongst the only markets whose production hasn’t declined this year. The games will increase tourism in Rio and throughout Brazil, this will be a short term effect but it will help increase spending in the economy, but might as well provide a long term boost in repetitive tourism. This could be very meaningful since Rio’s tourism is partly undeveloped today. The increased investment in transport links will probably have effect in increasing the productive capacity and will boost Aggregate Demand and economic growth. However, the increased spending will only represent a relatively small percentage of the GDP. Another issue revolving the Olympics is national pride and prestige, which really concerns Brazilian authorities. Take a look at London which begun its marketing campaign in the locking ceremony in Beijing.
So the required question is do the games bring benefits to make up for the constant rising prices? I’ll try to answer this question tomorrow in part 2.
The CEO Game.
Recent Comments