Japan is all aglow that it "won" the 2020 summer Olympics.
“When I heard the name Tokyo, I was so touched, overwhelmed,” said Shinzo Abe, Japan’s prime minister. “The joy was even greater than when I won my own election.” “Japan has seemed to be overshadowed by the rise of China and other developing nations,” said Harumi Arima, an independent political analyst. “These Olympics will give Japanese a chance to feel reborn, to feel for themselves that Japan can still be vibrant.”
With the upcoming 2014 Winter Olympics in Sochi, Russia and 2016 Summer Olympics in Brazil (as well as 2014 World Cup), now may be the right time to consider the implications of the world's biggest global sporting events for investors. To prepare for these events, Brazil and Russia are spending billions to modernize infrastructure, build stadiums, increase commerce, and promote tourism. To the casual observer, such activity might seem fit for economic expansion and strong investment performance. However, history suggests the opposite: Mega-sporting events usually leave the host nation with budget overruns and massive debt, and event-driven investment strategies have rarely succeeded. Case in point: An analysis of the Sydney Olympics’ impact on GDP illustrates the gap between hype and reality, evidenced by the considerable gulf between pre-Olympics estimates of economic benefits compared with post-Olympic studies (see the chart right). Present day: Preparations troubled in Brazil and Russia According to a recent study by the University of São Paulo, Brazil will spend roughly $18 billion on infrastructure ahead of the 2014 World Cup, $14 billion of which will come directly out of Brazilian taxpayers’ pockets. Expected outlays devoted to the 2016 Olympics are likely to be an additional $15 billion, for a combined total of $33 billion.8 If the Brazil Olympics do go over budget, it would be the second-most expensive Games ever. Protests in Brazil Scores of Brazilians have taken to the streets to protest these high costs. The initial demonstrations were in response to a proposed rate increase for bus and metro fares, but the dissent quickly spread to include excessive spending on stadiums, corruption, and poor public services. Matheus Bizarria, an NGO Action Aid worker, said Brazilians have reached the limit of their tolerance. “It’s totally connected to the mega-events,” Bizarria said. “People have had enough.”
