Cities: Urban Studies & Urban Economics

Amer N. Raja

Emergence of Cities:

Since inception man's aim has always been to improve one's standard of life and to attain happiness. Further man is a need as well as desire driven being. However, life is a continuous activity surrounded with problems. If these problems left unsolved gradually it leads to chaos. Therefore, the purpose of knowledge as well as man's activities has always been to solve the problems.

As our knowledge about the beginning of human race is very limited, therefore it is impossible to precisely know the way of life of primitive humans. As human race emerges from a pair of a man and a woman, Adam and Eve, over a very long period of time humans multiplied exponentially. For varied reasons they split into sub groups and start moving away from the herd. There emerges the concept of migration. As they were forced to move they have to find a habitat that fulfills their basic needs of food, clothing, shelter and comparative security. Water is the very basic human need. Therefore, there is historical trend that human habitation has always been in proximity to resources of potable water, like rivers and wells. After fertile land and water resources are secured that provide the fundamental sources for basic needs, man strives for luxuries. Trading is the means of securing the rare, precious, value added and better goods. Traditionally, sea was the most advanced way of transferring goods and people with comparatively greater ease and speed to far away places. For this reason, we also find the emergence of large cities bordering coasts.

Problems and Growth of cities:

The desire for improving one's standard of life is innate. Trade and favorable geographical location of cities results in bringing prosperity to the cities. Mainly construction and trade activities increase because of prosperity that increases the demand for artisans and workers. Higher compensation attracts the artisans and workers from far off areas, with the passage of long time these migrants also settle in cities and grows exponentially. This kind of increase generally leads to haphazard growth of cities that creates multifarious problems like sanitation, housing, traffic, water, pollution, crime, disease etc. From the study of archaeological sites like Mohnjedaro we found a highly developed city with a web of roads and sanitation system.

Administration of cities:

Whenever some people start living together there emerges the need for some organization as well as laws for the running of the day-to-day affairs for business transactions, as well as resolving conflicts arising due to social interaction and for maintenance of law and order. Large cities with citizens from different races and religions require greater need for administration. This need results in analyzing and formulating plans and polices according to the prevalent technology, knowledge and social thought of the populace.

Mega cities, as we know today, are similarly established on these grounds. However, there is a significant difference in their organization, which is also result of technological factors, is that they is much more planning and similarity in their organization than their ancient simulacrum.

Urban Studies and Urban Economics:

The emergence of big as well as mega cities calls for specialized field of study. Therefore, academia has extensively worked on the problems faced by cities under the fields of Urban Studies and Urban Economics. Under Studies is a more comprehensive, holistic and objective oriented approach for catering the theoretical as well as practical requirements of the cities. It encompasses all the technical, social, political, economic and legal areas pertaining to cities. On the other hand, Urban Economics focuses on the monetary and financial aspects of all the areas studied under urban studies.

Urban economics is mainly focused on the study of urban domains focusing on the context of geographical location, transportation cost, and placement in production and consumption decisions. Besides it also tries to find the raison d'être of cities viz. the reasons for their emergence, how urban area is used with in cities, and the relative location of one city with other city and their suburbs, and density of its population. Furthermore it also studies the problems and their economic impact, costs and their solutions like: housing, pollution, crime, health issues, education, sewage and sanitation, urban sprawl, economic agglomeration, infrastructure development, public recreation facilities, economic planning, inflation, wage rate, mobilization & transit costs, and public finance.

The modern issues, as a result of unprecedented economic and technological growth, that urban economists faced and to find their solution along with other urban study specialists are:

1. Environmentalism/Eco-cities/Externalities: They are costs or benefits resulting from any economic activity that the unrelated parties incur. There are both negative and positive externalities. Pollution is an example of negative externality while planting trees around the boundary of any business establishment is an example of positive externality. Ecological sanitation is also a method used for attainting goal of healthy sustainable environment. It can be viewed as a three-step process dealing with human excreta: (1) Containment, (2) Sanitization, (3) Recycling and finding the best way of managing them. Establishment of an eco-industrial park is of special focus in it where businesses cooperate with each other and with the local community in an attempt to reduce waste, efficiently share resources (such as information, materials, water, energy, infrastructure, and natural resources), and produce sustainable development, with the intention of increasing economic gains and improving environmental quality.

2. Infra structure development & Transportation: Because of the impact of transportation, it is studies as an independent subject as Transportation economics associated with civil and mechanical engineering. Commuting and transportation are integral parts of any economic activity; therefore transportation is of main concern in urban economics. It has both positive and negative externalities. Further congestion, colloquially known as traffic jams, are a big problem as they result in slower speeds and longer lead times. The effects of congestion are:

Stress and frustration of commuters that may boost road rage and affect their health. It causes fuel waste and air pollution.

A special demand and supply study is undertaken in it. Where demand is measured as total distance traveled during all trips and supply is the available capacity of transportation options. Moreover financial implications to build and to support a transportation network are also special area of study.

Moreover transit-oriented development, traffic calming and sustainable urban infrastructure are also areas of special interest in this category.

3. Public Finance/ Municipal Finance/Government. Finance: Revenue and expenditures are the essential features of any organizational activity. There financing methods and budgeting are the area of study under the topic of public finance.

4. Population studies: In it the characteristics of the urban citizens are studied. Another phenomenon is that of Urban Migration is also of key importance.

5. Housing: Burgeoning population causes a problem among other things of housing. Affordable and environmentally sustainable housing are the tasks concerning Specialists of Urban studies and as well as economists. Landscape urbanism as well as public housing projects are some of the measures to resolve this issue.


6. Urban planning: Urban planning is a branch of land use planning and deals with the efficient placement of land use activities, infrastructure and settlement growth across an individual city or town The problems arising out of urban sprawl (unplanned, rapid and expansive urbanization) are a special area of interest for city planners. However, in it we also study various other issues. Another task of urban planning became urban renewal, and re-invigorating inner cities by adapting urban planning methods to existing cities, some with much long-term infrastructural decay. Some extreme measures like urban secession is a city's secession from its surrounding region; to form a new political unit are suggested for this purpose

7. Problem of Poverty, crime & Unemployment: Poverty is the main cause of crime and unemployment is another feature promoting crime. These features are important part of urban economics for the aim of economics is towards better standard of living and prosperity.


8. Urban Economic policy: It refers to the actions that local governments take in the economic field. It covers the systems for setting government deficit as well as the labor market, national ownership, and many other areas of government.

9. Economic geography: It is the study of the location, distribution and spatial organization of economic activities across the cities and its suburbs. It focuses on the Location theory, like industrial zones & economies of agglomeration and retail and wholesale businesses, on transportation and trade, and on the changing value of real estate. Urban economic geography is closely connected with topics as transportation, agriculture, industrial location, world trade the Geographic Information System, and the Spatial planning and function of business activity.

NIGERIAN BANKS, RECAPITALIZATION AND THE EVENTUAL TRAGEDY

Akwuobi Chinedu

Close watchers of the developments in the banking sector of late will attest to the fact that the wide speculation that all was not well with the sector is a sacred fact. Not a few analysts believe that the cause of the problem is from the industry operators who engage themselves in all manner of unethical, unprofessional practices such as a disregard for corporate governance, failure in risk management practices, profit inflation and other unethical conducts which has bedeviled the industry. However, analysts are yet to realize that the reason why our banks (those that survived) survived the consolidation exercise is the same reason why they are spending so much which has resulted in some industry players resorting to unethical practices that brought us to where we are today.

It is no news that during the recapitalization era, when the CBN mandated all the banks operating in the shores of Nigeria to recapitalize to the tune of 25billion, banks whose shareholders were unable to garner such amount resorted to the capital market through public offers and right issues. These banks flooded the primary market at regular intervals with their offers without proper appraisal of the long term cost implications of their actions. Hence the new shares which were created to raise enough capital is now taking a large chunk of the annual profit in the name of dividends. As though that is not enough, some banks, in a bid to satisfy their shareholders, declare bonuses on year on year basis which has lead to further cost implications.

Also, the manner in which these offers were raised was questionable. First, the prices were fixed arbitrary without an appropriate (if any) book building process. As well as a scenario where the NSE practically insisted that at least 80% of the issue must be underwritten which further guaranteed the success of these issues without recourse to fundamentals, which in ideal cases will form the bases for such “huge” success. As a result, these “successful” offers bloated the market capitalization of our banks to unsustainable heights.


TOP TEN MOST CAPITALIZED BANKS

S/No COMPANY VOLUME PRICE VALUE

1 First Bank 29,006,297,207 16.00 464,100,755,307.78

2 Zenith Bank 25,117,195,029 14.60 366,711,047,423.40

3 UBA 21,556,462,463 12.80 275,922,719,520.00

4 GT Bank 18,653,748,614 14.04 261,898,630,535.46

5 Ecobank 7,218,075,642 27.96 201,817,394,950.32

6 Union Bank 13,509,726,273 13.98 188,865,973,302.13

7 Stanbic IBTC 18,750,000,000 8.37 156,937,500,000.00

8 Oceanic Bank 22,221,369,213 6.27 139,327,984,965.51

9 IBPlc 18,860,014,978 6.45 121,647,096,608.10

10 Diamond Bank 14,475,243,105 7.97 115,367,687,550.04

Source: Nigerian Stock exchange

From the foregoing, it is clear First bank lead the rest with 29,006,297,207 shares outstanding, followed by Zenith, 25,117,195,029; And then Oceanic, UBA, and Intercontinental bank with 22,221,369,213, 21,556,462,463 and 18,860,014,978 outstanding shares respectively.

As at 2004, prior to the 2005 recapitalization exercise, UBA for instance, has 2.6 billion outstanding shares, a miniature of what we have today. First Bank, aside being the most capitalized, has a company policy of declaring bonuses and dividends almost on yearly basis which has impacted negatively on the company’s ability to retain a large chunk of earnings for investment purposes. Hence, looking at the financial risk and the competitive nature of the banking industry, it could get to a time when earnings cannot carry the shares outstanding.

Therefore, there is a need for a massive reduction in the floats of our banks if the current cost implications are to be averted. There is an urgent need for a massive share reconstruction which will not only create value for the shareholders by raising the value of their shares but also help to reduce cost in the long term. This could be achieved through share buy back (Repo), which, although in the short term appears costly but will invariably save huge funds in the long term, which will be hitherto used to service shares in the form of dividends.

While so many analysts will quickly disparage my opinion as anti growth, it is necessary to stress here, that, it is better to have a pair of shoe that is strong than to have two that can hardly be relied on.

The banking sector as has been stated many times accounts for up to sixty percent (60%) of the entire market capitalization of the NSE, which has lead to the industry exercising an over bearing influence in the stock market at the expense of other sectors. Hence a reduction in share volume will curb this anomaly and foster the growth of other sectors.

Akwuobi Chinedu
Dept. of Economics
Alvan Ikoku Federal College of Education
Owerri
IMO STATE

Leadership, Intangibles & Talent Q3 2009

Michael Folkman

Welcome to 2009’s third quarterly review, as with previous issues, engagement continues to be at the forefront of people’s thoughts. Behind the engagement debate however there seems to be a growing call for a wider reappraisal of the fundamental way corporations are organised and for me personally, this is the most interesting aspect of this quarter’s articles. Other themes include;

• Shifting the Organisational Pyramid

• The McLeod Review on Employee Engagement

• The Leader/Manager Debate

• Line Managers who Lead

• The Intrinsic Motivation of Autonomy, Mastery and Purpose

• The Irrationality of Human Behaviour

• Tomorrow’s HR Professionals - A Multi-Disciplinary Background

Articles are included from the likes of Harvard Business School, Henry Mintzberg, HR Magazine, McKinsey, the McLeod Review, the Partnership Institute, Personnel Today, Strategy + Business and TED. Comments and feedback are of course welcome. Q3 2009

Shifting the Organisational Pyramid The general consensus of commentators from a broad spectrum of disciplines is that the traditional organizational pyramid is not fit for purpose. See below to find out more. We are also seeing a notable increase in articles and blog posts focusing on recruitment in the upturn. Whether this is wishful thinking or a genuine sign of improving economic times remains to be seen.

On a continuing theme from previous updates, there can be no doubt that this year’s hot topic is employee engagement, whilst an acknowledgement of it’s importance is widespread, there remains considerable uncertainty around putting an effective engagement strategy into place. Furthermore as the discussion develops, it is becoming increasingly hard to separate engagement from other organizational issues such as; leadership, talent management and innovation. The McLeod Review on Employee Engagement July saw the release of the UK government backed McLeod Review[1] looking into the impact of poor employee engagement in the UK. Undoubtedly this is a strong endorsement of the positive effect of engagement on performance. However, there has been criticism from some for the lack of new insight or practical suggestions. I think that this is slightly missing the point and the report is far from the “recycled rubbish” claimed by Nicholas Higgins[2]. In a similar vein, Personnel Today[3] explicitly criticises the lack of practical suggestions. In my view, the job of this report is to make CEOs sit up and take note and raise what is traditionally seen to be a “soft issue” up the corporate agenda. The report is also meant to raise the issue of engagement for businesses of all sizes, again I think this is something that it achieves. As a first step in an ongoing process, this report gives HR directors the evidence to support the case for taking a serious look at engagement. Although short on new ideas there is no doubt that the Mcleod Review brings together lots of data and evidence supporting the argument for an increased commitment to engagement. A good summary by John Ingham can be found[4]. There is nothing revolutionary in the report and it is easy to see why some in the industry are frustrated by it’s lack of specifics. However as a document making the quantitative case for increased investment in engagement it is pretty solid and for those not directly involved in HR and its related disciplines, it is a good introduction. Despite the shortcomings, the conclusions reached by McLeod are likely to resonate with many. In short, McLeod is calling for a more sophisticated approach to people management. The report openly argues that due to amongst other things changing demographics and technology, engagement is not something organisations can approach with a one size fits all mentality. True engagement is focused on the needs of each individual. Furthermore, if organisations buy into this assertion, the role of line managers has to evolve away from the traditional administration/assigning tasks role to a more collaborative/coaching type approach, as McLeod states;

“Many people we spoke to identified managers’ approaches and behaviours as key factors in disengagement – as one respondent said, they sometimes act as “a great impermeable dampproof course.” Jeff Kelly, of the Partnership Institute, told us at a round table discussion for this review: “There is a territorial problem and a comfort zone problem. Many feel comfortable with managing staff on an adversarial basis and don’t want to give it up.” My feeling is that what is being called for in the McLeod Review goes much further than encouraging organisations
to adopt a formal engagement programme. If organisations are to fully realise the benefits outlined in the report it is going to require a complete rethink in the way corporations manage and engage their people. Curiously enough there have been a number of other articles published this quarter that I feel more explicitly reflect the findings of the McLeod Review. Interestingly, these articles are all written by people from a variety of backgrounds or disciplines yet the underlying message is very similar. The Leader/Manager Debate To kick things off, Henry Mintzberg has created a buzz with a look at the perennial manager/leader debate[5]. This was also a topic covered in the previous issue. In this article Mintzberg is critical of the traditional role of corporate leaders who he brands as aloof and disconnected from the workforce, therefore having little idea of what is actually happening in the organisation. It is this disconnection that hampers so many organisational initiatives. In Mintzberg’s view, corporate America is overled and undermanaged.

True leadership is something that may only be required on an ad hoc basis, in particular during times of uncertainty or dealing with specific challenges or unknowns. These are the challenges which we most associate and value strong leadership with such as charisma, determination and vision. Effective management on the other hand is something that requires a more mundane yet equally valuable approach. “As Stanford University emeritus professor James G. March put it: "Leadership involves plumbing as well as poetry." Instead of distinguishing leaders from managers, we should encourage all managers to be leaders. And we should define "leadership" as management practiced well.” At the heart of Mintzberg’s criticism is that the traditional corporate pyramid encourages and supports this disconnection between leaders and the rest of the organisation. Jamie Notter[6]. has an good summary of the Mintzberg article and picks up on his assertion that organisations need to review the usefulness of the prevailing hierarchical model of organisational design. Line Managers who Lead The notion of line managers who lead is explored in this recent McKinsey article[7]. An idea that is coming from a similar direction to Mintzberg, instead of training managers in process and administration, they can improve productivity by empowering the peoplearound them. In this way managers can be seen as catalysts to creativity, innovation and devolved decision-making. In particular managers need to address the issues that are of particular relevance to them and their people. This can be anything from dealing with interpersonal issues to customer relationships. The article goes on to say; “To unlock a team's abilities, a manager at any level must spend a significant amount of time on two activities: helping the team understand the company's direction and its implications for team members and coaching for performance.”

This prompts the question, is the traditional top down business model fit for purpose in the 21st Century? To highlight this confusion between management and leadership, one particular criticism outlined by Mintzberg in another article[8] is what he refers to as leading through information or “deeming” as he terms it. This is where leaders deem that certain targets need achieving, such as sales need to rise by 10% or we need to cut 15% of staff. By any definition this is not leadership and as such is unlikely to engage or motivate employess apart from through fear. Dismantling the organisational pyramid is also the topic of a Strategy + Business
article[9]. Ostensibly discussing talent management, the theme is the same as Mintzberg’s argument and calls for a fundamental reassessment of how organisations engage with their employees. The article argues that the traditional career progression structured through an organisational pyramid structure is outdated and not fit for current and future demographics. Instead organisations need to take a more sophisticated and flexible approach to career development based on the individual. The Intrinsic Motivation of Autonomy, Mastery and Purpose Further evidence to support a radical reappraisal in the way organizations structure themselves is outlined by Dan Pink who delivered an entertaining TED talk[10], well worth the 20 minutes if you have the time. In it he discusses the failure of bonuses and incentives to improve performance. Contrary to popularly held beliefs in the corporate world at least, the basis of Pink’s talk is that traditional monetary incentives fail to boost performance in all but the most mundane or mechanical tasks. Citing a number of scientific sources, Pink states that the traditional reward structure used by organizations is not an effective means of motivation. Clearly this view undermines many of the assumptions that organizations implicitly make about motivation and performance. In getting rid of the traditional carrot and stick approach, Pink focuses on three areas of what he terms “intrinsic motivation” of autonomy, mastery and purpose. In discussing the role of autonomy, Pink is another to go against the orthodoxy and directly criticise the traditional organisational pyramid which concentrates decision-making in the upper echelons. By removing self-direction, organisations are undermining the ability of employees to fully engage with their work. At the same time feelings of unfairness are likely to grow. Clearly, Pink is suggesting that organizations need a fundamental rethink in the way that they motivate their employees. As Pink repeatedly summarises; “there's a mismatch between what science knows and what business does.” The Irrationality of Human Behaviour As if that isn’t enough, we are continuing to see an increase in articles focusing on the “irrationality” of human behaviour. In a posting on the Harvard Business School site Jim Heskett[11] kicksoff a decent discussion about a recent HBR article[12] by Dan Ariely. Again, this has significant implications for our approach to management theory and assumptions about human behaviour. “Reactions to our efforts as managers reflect what each individual receives in relation to what he or she perceives and expects. Because this is highly subjective, the argument goes, generalizations (many of them currently taught in conventional courses) about how to manage are practically useless. Instead, managers should encourage employees to set their own goals, appraise their own achievements, and reach their own conclusions about how to improve. Managers should also spend more of their time inspiring (through stories) and devising engaging activities from which employees may, to some extent, choose.” Are you starting to see a theme here yet? Whilst there is no shortage of new ideas being put forward, within the HR specific press, the focus has been more inward and arguably more pessimistic over recent months. Tomorrow’s HR Professionals A Multi-Disciplinary Background In particular, HR Magazine in the UK has run a series of articles that have a generally pessimistic view of the furture for HR. The debate seems to have moved on from the rallying cry for HR to be provided with a seat at the top table to a questioning of whether the function can actually make a strategic contribution.

For example, David Woods[13] cites a Logica survey with the headline figure claiming that 70% of HR Directors feel that they do not have sufficient information to avoid a widening skills gap. Given new technology and information available to HR professionals, is there any excuse for this? Elsewhere, Maurice Duffy[14] muses on the future of HR. In a strongly worded article, he articulates a potential future for HR where it is able to contribute significantly to organisational effectiveness. Unfortunately, Duffy is skeptical whether the majority of current HR practitioners are capable of delivering this vision. As Duffy states; “My view is that HR is populated with too many self-seeking, blame-shifting blockers and manipulators who kill the enlightened view and restrict and choke organisational progression. You know them - the pen- pushing administrators and positioners, who tell the business what it cannot do, build processes and systems that inhibit or dilute any sensible simplicity that is a key requisite in the current world where change, speed and innovation are the new business imperatives.“ On a similar note, Rhonda Eckert has a blog post[15] asking whether HR is in danger of becoming extinct? She
echoes Murray in her assertion that tomorrow’s HR professionals are going to come from a multi-disciplinary background. Maybe not the end of HR but possibly signifying a shift in the experience or requirements for HR professionals. Likewise, Jan Kingsley at ASPEL[16] talks about the fragmentation of learning and its possible resolution, saying “L&D is becoming more specialized with people developing specific competencies and skills in discrete areas, for example, becoming specialists in coaching, facilitation or learning design. This is being driven in part by
customer and client expectations, but also the use of technologies which makes the whole issue of learning much more complex. Navigating this maze of information and techniques and overcoming their inherent complexities will be a major factor in making L&D much more effective.” While debates on the specific themes will no doubt continue, the possibilities for HR and leadership going forward are intriguing and imply a number of changes. While the recession has almost forced people to reflect on their organizations and practice, the seeds of
the future may well be taking route already.

Michael Folkman, Director

michael.folkman@fourgroups.com

[1] http://fourgroups.com/link/?86
[2] http://fourgroups.com/link/?87
[3] http://fourgroups.com/link/?88
[4] http://fourgroups.com/link/?89
[5] http://fourgroups.com/link/?90
[6] http://fourgroups.com/link/?91
[7] http://fourgroups.com/link/?92
[8] http://fourgroups.com/link/?93
[9] http://fourgroups.com/link/?94
[10] http://fourgroups.com/link/?95
[11] . http://fourgroups.com/link/?96
[12] http://fourgroups.com/link/?97
[13] http://fourgroups.com/link/?98
[14] http://fourgroups.com/link/?99
[15] http://fourgroups.com/link/?100
[16] http://fourgroups.com/link/?101

Brazil and its economic self-fulfilling prophecies

Estela Lutero

Although crisis has begun in the United States and Europe at the end of 2007, until September 2008, Brazil was not touched. In the third trimester of 2008, the Brazilian GDP had increased 6.8%. But with the fallen of the Lehman Brothers, that caused a gradual hold of the world financial system; there was a drastic effect on credit. In Brazil, 19% of the credit had foreign sources. The collapse of those lines irradiated a chain effect, thus restricting the credits for production. At the same time, national banks were also having a hard time to get money abroad. Adding all of these, domestically Brazilians felt the credit crunch, for instance while financing automobiles. Inside, the recession process was a little different from elsewhere, because, in Brazil the retraction was being pulled by the industrial sector. So keeping the positive expectations of the entrepreneurs would be a good solution. And the government was aware of that.

In a self-fulfilling prophecy, Lula, president of Brazil, stated on October 4, 2008: “There [in the USA], the crisis is a tsunami. Here, if it reaches us, it will be a marolinha (high wave), not even good enough for surfing.”

Lula’s words were well supported by the wealthy financial situation Brazil was building. Brazil got into the crisis with resources. Recent macroeconomic policies have insulated the economy from external shocks. There were U$ 205 billion in international reserves. Moreover, the domestic demand was increasing 9% yearly. The investment rate was also growing. Inflation was stabilized. And very important: a wealthy and solid financial system. The Brazilian Government did not have to spend a penny to rescue banks , as it happened in other countries.

Some investment programs were also important such as the Program for Accelerated Growth (or PAC) which was not scaled back. The PAC came into being in January 2008 and is a public-private infrastructure program with US$283.3M being invested primarily in energy projects up until 2010. Additionally, The BNDES, the Brazilian Development Bank adopted a very aggressive attitude toward credit concession in order to protect production against the impacts of the global financial crisis.

The results came soon, after two trimesters of GDP fall, GDP showed an increase of 1.9% in the second trimester of 2009 - manufacturing sector, with an increase of +2.1%, and services +1.2%. For 2010, Brazilian government is betting that the GDP will go up by 5% in 2010.

Moreover, with some recent events, it is easy to foreseen that the optimist wave is here to stay. The world cup in 2014, the Olympic games in 2016 and sub-salt prospects (petroleum) will definitely stretch the positive environment. These events have brought positive prospects for the infrastructure, industrial and service sectors and have placed Brazil among the world’s biggest players.

In the long-run the subset reserves alone are expected to generate a turnover of US$440 billion in terms of technological development, increase in industrial capacity, construction of shipyards and job creation.

Meanwhile, the World Cup and the Olympic Games will lead to the construction of new sports venues and improve the transport and telecommunications infrastructure, the electricity supply and security, health, hotel and tourism services.

According to a study commissioned by the Brazilian government to calculate the economic impact of the Olympic and Paralympic Games on Rio de Janeiro, based on an investment estimate of US$14.4 billion the events are expected to generate a turnover of US$51.1 billion, 120,000 direct and indirect jobs a year in the period leading up to the games and 130,000 jobs a year afterwards.

Along with the favoring conjuncture mentioned here, there are many other structural reasons for Brazil to keep its optimism, such as: its strong domestic market growing in purchase power and proportionate to the population; largest food exporter in the world ensuring foreign market sales on a significant scale under any scenario; and its diversified foreign market with buyers in the whole world, while exports of goods and services with added value are growing.
This is no doubt that Brazil's growth expectation for 2010 of 5% of GDP is highly likely.

Estela Lutero is Master in Economics (Universidade Estadual de Campinas). She is Senior Project Manager at Auctus and Infrastructure Economics Consultant in Brazil. Contact mail: estelalutero@hotmail.com