Rio 2016: Opportunities and Responsibilities

 

Rio 2016: Opportunities and Responsibilities

Eternally lain on a splendid cradle,
by the sound of the sea and the light of the deep sky,
thou shinest, O Brazil, garland of America,
illuminated by the sun of the New World!

Hino Nacional Brasileiro (Brazilian National Anthem)

Brazil certainly has a lot to boast about in the New Year, not in the least its winning bid to host the 2016 Summer Olympics in the Cidade Maravilhosaof Rio de Janeiro. The decision by the International Olympic Committee (IOC) on October 2, 2009, speaks loudly to the global community, signalling Brazil’s arrival on the world stage and showing that a developing nation has the ability to muscle in on both global athletic and economic games.

The real gold medal, however, is not Brazil’s winning bid or its recent economic prowess—while a shiny new investment grade rating and a prediction to be the world’s fifth largest economy by 2016 are impressive achievements—it’s that the Games should enable the country to deliver a more stable, robust investment market in the long term.

Brazil’s ability to meet this goal will depend largely on whether its public and private sectors can work together strategically and with purpose and responsibility. This article proposes that Brazil is taking steps in the right direction, with a post-Olympics market expected to be more sophisticated and transparent. Required infrastructure development will have a ripple effect on economic growth, with improvements in civil-society apparatus making the country more attractive to stable long-term investment. Opportunities in commodities, foreign exchange (FX) and the green sector are likely to grow, while consistent improvements to the country’s regulatory system will better protect the market.

The Brazilian Model

Key to Brazil’s investment approach for the Games is its integration of funding partners and unique mixing of social policy and market economics. Brazil’s Administration has allocated$11 billion for infrastructure-related spending, with the mega-event expected to add around $51.1 billion to the economy through to 2027. Funding is split between local and federal levels of Government, private sources, the IOC and multilateral institutions such as The Worldbank. This layering and cross-sectional investment backing is good news for the risk-averse investor. Private sector participation in infrastructure will be essential for Brazil to meet its development targets in time for the Games, as well as the preceding 2013 Confederations Cup and the 2014 World Cup.

Commodities

With China’s growth rate barely skipping a beat throughout the global downturn, commodity prices a.....




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