Olympics Spending Delayed Recession in Rio

(ATR) A Brazilian economic study says the gross domestic product of Rio de Janeiro from 2012-15 would have been 7.5 percent smaller if not for the 2016 Olympic Games.

The study was produced by the Brazilian Institute for Applied Economic Research (IPEA), a publicly run think tank.

To generate the findings, author Glauter Rocha, used a synthetic control method which used economic data from 15 other Brazilian cities with populations over one million to create a mock Rio de Janeiro that did not host the Olympics. The study showed that public investment for the Olympics staved off the effects from the 2014 Brazilian recession for municipal GDP per capita in relation to other cities.

In the study Rocha posited that the effects could be used to extrapolate future economic conditions from Rio because of the favorable climate created by the public investment. This could show future increases in sectors such as tourism and exports, according to a release about the study.

Brazil did in fact have a record number of international tourists visit the country in 2017, the year after Rio hosted the Olympics.

Rocha’s results echo a similar study done on Rio’s municipal GDP commissioned by outgoing mayor Eduardo Paes in 2016.

The IOC described the results of the study in a news release as confirming the "Games provided significant economic benefit to Rio de Janeiro" and "helped mitigate the consequences of what would become Brazil’s worst recession on record for the Games host city and region".

A release from IPEA about Rocha’s study says that "future economic impacts are not automatic," meaning Rio’s economic future is not assured based on the mitigating factors ahead of the recession.

"[Future economic impacts] depend on the ability of public and private actors to take advantage of the benefits that the event has provided," the statement said.

Brazilian economist, and professor at New York University in Shanghai, Rodrigo Zeidan told Around the Rings the study's findings are sound but "unsurprising".

"Of course a bout of investment is going to increase GDP in the short run, but at what cost?" Zeidan asked.

Investments for the Olympics may have benefited the city during the period leading up to the event, but a crushing recession after the Olympics ended has shown the true costs of the Games. Since the Olympics left, public security in the city eroded, two temporary venues in the Olympic Park still have not been dismantled, and the previous and current state governments were barred by a court from paying off debt the Organizing Committee still holds.

Currently, the Brazilian government still operates a majority of venues at the Barra Olympic Park, as plans to find a private operator have been delayed.

"The only lasting effect of the Olympics seems to be some transport infrastructure that was long overdue in any case," Zeidan added. "The Brazilian recession certainly impacted Rio but its effects were delayed until the Olympics. The economy crashed after the boost from the Olympics ended, which is even more evidence that the Olympics won't have a long lasting impact in the city."

Written by Aaron Bauer

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