2016 Olympic Game in Rio: Brazilian Economic Crisis and Investment Idea


Rio 2016 Olympic Games started on August 5 and will end on 21 August, but the political, economic and social conditions of Brazil do not allow the country to address such event in the best way.

When Rio de Janeiro was a candidate to host the Olympic Games in Rio de Janeiro, in Brazil everything worked great: the economy was flourishing, the middle class was growing rapidly and many oil reserves had been discovered on the coast in less than 10 years.

When Brazil won the bid for the football World Cup in 2007 and the Olympics in 2009, the country was going through a roll.

The fact that Brazil was going to host consecutively two major events had to help the country to grow more, to stimulate employment, to attract tourism, to develop infrastructure and to attract billions of financial investments even after the Olympic Games.

Back in 2001, when its BRIC fund was closed, Goldman Sachs had supported the idea that Brazil was one of the four economies with the fastest growth.

Thanks to the vast resources and the income derived from oil, agriculture, mining and other raw materials and with the onset of exports to China (18% of total exports) and US (the 13%), Brazil was able to get out of the financial crisis in 2008.

Seven years after, President Lula was overwhelmed by the Petrobras bribes scandal that led the judges to ask for his arrest for giving a signal to the markets.

Since then the real economy began to falter. Inflation has come down to 10% due to the collapse of raw materials. Between 2002 and 2014 the minimum wage increased by 77% and the Brazilians in extreme poverty fell from 3% to 9% of the population. The unemployment rate had reached 11.2% in 2015, the economy has dropped to the ninth place of the World economies, GDP fell to 3.8% (the worst in 25 years) and the industry fell by 6.2%.

A few weeks before the opening of the Olympic Games in Brazil in 2016, the governor of Rio de Janeiro has declared a state of financial emergency, begging the government to release 6 billion dollars in aid needed to avoid a complete collapse of the infrastructure.

Talk about investment does not seem the most appropriate thing after describing such a scenario.

If we think that Brazilian real has lost around 20% of its value against the dollar it seems that even with forex you can earn something meaningful.

Our recommendation is to be cautious. A prestigious academic research, in fact, has shown that equities tend to be particularly vulnerable during sporting events with wide media coverage.

These have found that, on average, the loss of a game for a country has been followed by the descent of his main stock market the next day, producing a significantly lower average yield. Everything seems to be linked to the pessimistic mood triggered by the loss of a game of a country team. Obviously we talk about the collective impact of the race to sell on global stock markets, where to be significant is the combined effect.

You just have to throw yourself on sports betting that are the most obvious thanks to the amount of appointments and competitions scheduled during the Olympics game.


Leave a Comment

Your email address will not be published.

You may also like