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Olympic host Brazil needs funds

October 13th, 2009

rioolympicsBrazil urgently needs to find new investment and to streamline its bulky bureaucracy as it prepares to host the world’s two biggest sporting events: the 2016 Olympics and 2014 soccer World Cup, according to analysts.

After Rio de Janeiro was chosen as the host of the 2016 Olympiad, the government promised new investment in a slew of new projects.

But even before it starts preparing for the Olympics, the country will have to remodel and build new stadiums in 12 cities so that they could receive participants of the 2014 soccer World Cup.

To organize both events, the country will have to spend between 17,6 billion and 30 billion dollars, according to professor Francisco Carlos of the Foundation Institute of Economic Research.

But the newspaper O Globo said Saturday that the current budget for the Olympics alone stands at 28.8 billion reals, or 16.1 billion dollars.

Initially, according to Carlos, Brazil will have “to make enormous investment in its infrastructure because the country does not have an adequate infrastructure to host both sporting events.”

As part of this program, Brazil will need to improve and develop land and air transportation systems, increase the availability of hotel rooms and bolster its telecommunications network to meet growing demand.

“This will stimulate the country’s economy,” Carlos pointed out.

Most of these investments will have to come from the government, which will be dramatically affected by the program.

Currently, the government spends one percent of its annual budget on infrastructure improvements. But with the two major events on the horizon, “the government will have to raise its public debt level to an extreme,” the professor warned.

The Brazilian government’s public debt stood at 677 billion dollars in August, which equals 44 percent of gross domestic product, according to the Central Bank. This level of public debt is still far from what many industrialized nations have to cope with.

Another significant danger facing Brazil is its lack of forward-looking management.

“Brazil does not has a tradition for such management,” said Marilson Alves Goncalves, professor of management at the University of Sao Paulo. “In this country, people improvise.”

According to Alves, the government in Brazil has always operated “reactively rather than proactively.

“Because of this, the dream of the World Cup and the Olympics is essential to allow Brazil to develop a strategy,” said the professor. “For now Brazil does not have a strategy. It has always been a country where people improvise.”

Facing the chance of attracting significant private investment, the government, says Alves, must insure the availability of a serious management system.

Without such a system and with an influx of money, the country will run the same risk as “the driver of a car going at a high speed but without the ability to steer,” warned the professor.

Francisco Carlos noted for his part that foreign investment “does not come to a country unless there are clear rules,” which is not the case today.

That is why in order to attract foreign investment, Brazil will have to undertake serious tax and government reform and de-bureaucratize the system, he pointed out.

The next government, which will be formed as a result of the 2010 elections, will have to undertake these reforms.

Normally, a new president “has significant latitude in his first year, and he will have to make good use of it to enact necessary changes,” Carlos said.

by Anella Reta

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