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Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy
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Predicting the impact of FIFA 2014 & Olympics 2016 on the economy of Brazil's Economy

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Analysis of FIFA 2014 & Olympics 2016 on the economy of Brazil by Nitesh Singh Patel, IMT, Nagpur

Analysis of FIFA 2014 & Olympics 2016 on the economy of Brazil by Nitesh Singh Patel, IMT, Nagpur

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  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

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