The document analyzes the predicted economic impact of hosting the 2014 FIFA World Cup and 2016 Olympics on Brazil. It finds that most past host countries did not see profits from such events, except Los Angeles in 1984 and Barcelona in 1992. Brazil plans to spend $1 trillion on infrastructure upgrades for the events. This is expected to boost tourism, telecommunications, and transportation sectors. Quantitative analysis shows high correlation between GDP and FDI in Brazil. While the events may boost Brazil's economy, the government needs to control costs to avoid overruns and delays.

1. PREDICTING THE IMPACT OF “FIFA
WORLD CUP 2014 AND OLYMPICS
2016 ON THE ECONOMY OF BRAZIL”
Presented By:
Nimisha Agarwal (2013173)
Nitesh Singh Patel (2013178)
Nitin Boratwar (2013179)
Pawan Agarwal (2013195)
Prerna Bansal (2013209)
Priya Jain (2013210)
Section: D, PGDM (2013-15)
Term: III
Economic Environment of Business

2. BRAZIL: WHERE DOES IT STAND?
The Global economy will grow
3.8% in 2014
In Brazil, higher interest rates
and a weaker exchange rate
have emerged as key elements
of the new macroeconomic
environment.
Brazil have revised their GDP
forecast to 2.9% in 2014
Currency depreciation will help
keep inflation under pressure
Public sector accounts are
expected to worsen in 2014.
(Source:
http://www.bbvaresearch.com/KETD/fbin/mult/1308_Brazileconom
icoutlook_tcm348-398950.pdf?ts=28102013

3. EXPERIENCE OF PAST HOST COUNTRIES
OF OLYMPICS & WORLD CUP
Most of such events have not
been profitable
Only Los Angeles (1984) &
Barcelona (1992) have been
economically profitable
Greece (2004) incurred a
debt of $15 Billion
(Source: The Guardian, “Don’t Bank
On the Olympics,” Jan. 6, 2012.)
(Source: International Journal of Olympic History)

4. IMPACT ON INFRASTRUCTURE &
TOURISM OF BRAZIL
Brazil would be spending R$1 trillion in public works for renovation and
construction of 12 stadiums
The projected work includes: building new roads
Creating a rapid-transit train between São Paulo and Rio, new subway
lines in São Paulo and new ports
Expanding 12 airports
Compared to London Olympics (40%), Brazil is more interested in
infrastructure development rather than spending on sports activities
(20%)
Constant growth in tourism industry from last 5 years
79% increase expected in tourism because of sports events
FIFA would account an additional income of R$5.94 Billion

5. IMPACT ON
TELECOMMUNICATION
Announcement of R$13 Billion broadband plan
Subsidies to go from R$12 Million to R$40 Million
Brazilian broadcasters (Globo, RBS and Net Servicos) are expected to
show a double digit growth
Govt. asked the telecom companies to spend more in Brazil

6. IMPACT ON TRANSPORTATION
To fulfill the
demands of
increased
tourists R$1.21
Million will be
spent
Maintenance
of 4334 KMs
of highway
needs an
additional
R$1.44 Billion

7. IMPACT ON SOME MORE AREAS
Environment
Community
involvement &
development
Consumer issues
Labor practices
Reputation
management

8. QUANTITATIVE ANALYSIS
Year GDP (current US$)
Gross capital formation
(Current US$)
Gross capital
formation to GDP
ratio
2002 504221228974.04 81663993995.02 16.20%
2003 552469288267.79 87129021774.46 15.77%
2004 663760341880.34 113618119658.12 17.12%
2005 882185702547.25 142964667214.46 16.21%
2006 1088916819852.94 182456341911.77 16.76%
2007 1366853244424.28 250511754912.33 18.33%
2008 1653538618144.80 342190754912.48 20.69%
2009 1620165226993.77 289005630590.52 17.84%
2010 2143035333258.24 433720677049.82 20.24%
2011 2476652189879.72 488550903630.68 19.73%
2012 2252664120777.39 397297535308.29 17.64%
Gross Capital Formation to GDP Ratio of Brazil for period
2002-12
Source:
http://data.worldbank.org/topic/economy-and-
growth
Figure: Gross Capital Formation to GDP ratio
plotted using MS-Excel

9. QUANTITATIVE ANALYSIS
Year GDP (current US$)of Brazil FDI (current US$) of Brazil
2002 504221228974.04 16590204193.11
2003 552469288267.79 10143524670.99
2004 663760341880.34 18165693855.28
2005 882185702547.25 15459981604.12
2006 1088916819852.94 19378093068.00
2007 1366853244424.28 44579492464.00
2008 1653538618144.80 50716402711.00
2009 1620165226993.77 31480932200.00
2010 2143035333258.24 53344632547.00
2011 2476652189879.72 71538657409.37
2012 2252664120777.39 76110663188.77
Correlation Analysis of GDP and FDI for the
period 2002-12 of Brazil
CORRELATION VALUE = 0.94 (STRONGLY RELATED)
Year GDP growth(annual%)(X)
Inflation,
consumer
prices(%)(Y)
2001 1.31 6.84
2002 2.66 8.45
2003 1.15 14.72
2004 5.71 6.60
2005 3.16 6.87
2006 3.96 4.18
2007 6.10 3.64
2008 5.17 5.66
2009 -0.33 4.89
2010 7.53 5.04
2011 2.73 6.64
2012 0.87 5.40
Regression Analysis between
GDP growth and Inflation
http://data.worldbank.org/topic/e
conomy-and-growth
http://data.worldbank.org/topic/economy-and-
growth

10. Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 8.053798911 1.4277884 5.640 0.0002 4.8724 11.235 4.87249 11.23511
X Variable -0.443019507 0.35210017 1.2582 0.2369 1.2275 0.3415 1.22755 0.341509
Regression Equation: Y = 8.053 – 0.443X where Y is Inflation (consumer prices) and X is GDP growth (annual %) of Brazil.
Year
GDP growth(annual %)(X)(Source :
World Bank.org)
Inflation, consumer
prices(%)(Y)(Source: pwc.co.uk)
Forecasted Inflation (consumer prices)(%)(Y) using regression
equation (Y=8.053-0.443X)
2013F 2.20 6.2 7.08
2014F 2.40 5.8 6.99
2015F 2.70 5.6 6.85
Source: http://www.pwc.co.uk/economic-services/global-economy-watch/gew-projections.jhtml
http://www.worldbank.org/en/publication/global-economic-prospects/data?region=LAC (where F = Forecast)

11. CONCLUSION
We find that Brazilian Govt. might be able to conduct both the events successfully
They need to be cautious in evaluating costs & benefits
Risk of cost overruns
Time delay must be avoided
Development banks should refrain from non-infrastructural investment
Commercial banks should invest in non-infrastructural investment
Government should enter into PPP to avoid risks
Legal system should be fast & robust

12. REFERENCES
• ErnstandYoungReport(http://www.ey.com/Publication/vwLUAssets/Sustainable_Brazil_-_World_Cup/$FILE/copa_2014.pdf
• http://www.managementcanvas.iimindore.in/icanvas/index.php?option=com_content&view=article&id=224:world-cup-
2014-rio&catid=44:other-areas&Itemid=61)
• http://www.americasquarterly.org/zimbalist
• Standard & Poor’s Credit Week “Brazil Gears up for the Games”
• http://www.fifa.com/mm/document/fifaworldcup/generic/02/11/18/55/sustainabilitystrategyconcept_neutral.pdf
• http://www.ey.com/Publication/vwLUAssets/Sustainable_Brazil_-_World_Cup/$FILE/copa_2014.pdf
• Brazil Gears Up For the Games- Standard & Poor's (July, 2012).
• Capturing the momentum: E&Y's 2012 attractiveness survey- Brazil Ernst &Young (2012).
• Source: Jose Roberto Afonso, Reuniao do Conselho de Economia da Associacao Comercial de Sao Paulo, April 26, 2010
• http://data.worldbank.org/topic/economy-and-growth
• http://www.pwc.co.uk/economic-services/global-economy-watch/gew-projections.jhtm
• http://www.ey.com/Publication/vwLUAssets/Sustainable_Brazil_-_World_Cup/$FILE/copa_2014.pdf