In between this year’s Olympic and Paralympic games Brazil is keeping itself in the headlines with yesterday’s awaited impeachment of President Dilma Rousseff. But as much as this news reflects the breadth of corruption (even amidst the once anti-corruption heralded Worker’s Party) it also demonstrates the forward momentum of reform that could eventually see Brazil through its recent months of political turmoil and years of subdued growth. Indeed its successes in beating expectations for hosting the 2016 Summer Olympics help affirm such optimism in its ability to also overcome the myriad of political and economic challenges, given time.
In the midst of such civil unrest what Brazil needed least was more negative publicity and to fail on the global sporting stage. Such embarrassment would have confirmed international scepticism of inept governance and an inability to overcome the multitude of changes that Brazil current faces. But thankfully Brazilians should be able to look back on the Olympic (and hopefully Paralympic) Games with pride; which would not be trivial in a country that has so often found needed inspiration through sporting success.
In last month’s Olympic Games Brazil attained a respectable 13th place on the medal tables with 7 golds (including a noteworthy Men’s football home gold) and 19 overall making it their most successful medal haul. But their most resounding achievement was their relative success as hosts. Notwithstanding some of the street riots and the “Welcome To Hell” banners that police greeted arrivals at the airport with; the Rio Games seem to have largely overcome logistical, financial, infrastructure, disease, terrorism and crime concerns to pull of inspirational ceremonies and a commendably smooth competition. The most infamous gunpoint robbery during the Games was apparently little more than a drunken farce from now disgraced US swimming gold medallist Ryan Lochte.
It was 9 years ago that Brazil submitted its bid to host this year’s Olympics and Paralympics. Since then much has happened to make such a risky and extravagant venture seem destined to fail, indeed leading up to the Games two thirds of locals though that hosting would cause more harm than good. They are still likely to be right in financial terms. For the past century it is estimated that only the 1984 Olympics in Los Angeles has been the sole profitable Games for the host country and none have come in under budget since 1960. And although the Rio costs are estimated to have overrun by 51% that is still under the average overspend of 56%. Also at an estimated $4.6bn the Rio Games cost less than a third/quarter of the most recent and most expensive Summer and Winter Olympics; London 2012 cost $15bn with Sochi 2014 costing an extravagant $21.9bn.
But in reputational terms the Rio Olympics is a reminder of the once worshiped potential of this Latin American behemoth. Brazil still stands closer to the precipice of economic uncertainty compared with many other Central and Southern American countries and our Net Foreign Asset Analysis puts the country debts just on the 50% of GDP line (where we deem overall indebtedness to be excessive and vulnerable to shocks). Moreover when accounting for such overall indebtedness and uncertainty more attractive risk adjusted returns can be found outside the Americas. But we see the current negative political news as part of a longer term positive trend of reform which down the line may be enough to make investment into the region worthwhile again. However just like Brazil’s Olympic football gold win, investors and reformers may still have to wait for extra time and endure some penalties in the meantime before their efforts are rewarded. For now at least, looking from the sidelines there still seems to be better value and better opportunities elsewhere.