What’s the trade?
Most people are forgetting that Brazil is already going to host the 2014 World Cup. If you put the two events together, the amount of investment that will have to be done, particularly on the infrastructure side, is significant,” says Vinicius Silva, equity strategist at Morgan Stanley.
(And) some things need to be done many years in advance of these events actually happening -- roads, rail, airports, energy to support the investments.
I like the infrastructure play, says Zach Karabell. I’d look at Vale. Or if you want a US play I’d look at Archer Daniels Midland as a food play on soybeans and corn, major parts of Brazil's ag market.
I also like infrastructure, says Tim Seymour. Or you can look at cellphone makers such as Vivo Participacoes and TIM Participacoes as well as airlines including Gol Linhas Aereas Inteligentes and TAM Linhas Aereas .
Our news partner Reuters compiled a list of some principal challenges Rio faces with the games and resulting opportunities for investment. We thought you might be interested. They follow:
Despite the considerable sports infrastructure built for the 2007 Pan-American Games, Rio will have to build from scratch nearly half the stadium capacity it needs and carry out renovations to provide another 24 percent of the minimum required seating.
This will require building a wide array of facilities such as an arena for diving and water polo. The Maracana soccer stadium is expected to be up to par by 2016 because it will be upgraded for the 2014 soccer World Cup to be held in Brazil.
Beating traffic will be a top priority for Rio because the city has a limited metro system that does not link the city center and most of its hotels to the outskirts of Barra da Tijuca, where the venues are concentrated.
The city will spend $5 billion on rapid-transit bus lines to cut through traffic between Barra and the beachside neighborhoods of Copacabana and Ipanema. Organizers say athletes should get to events within 25 minutes, though fans may sit through up to an hour of traffic.
The city failed to honor ambitious transportation promises made in the run-up to the Pan-American Games, including metro extensions and a system of ferries along Rio's coastline. And even the new bus system will not link the international airport to the venue circuit.
Renowned for its natural wonders including beaches and the Sugar Loaf mountain, Rio is also notorious for violent crime in its shantytowns, or "favelas," driven largely by warring drug gangs.
While most of the events are far from Rio's slums, some venues are in areas considered to be high risk. The Maracana soccer stadium, for example, is close to the Manguiera favela where gang confrontations and shootouts are not uncommon.
The organizers note that despite these concerns, there were no serious security problems during previous events such as the Pan-American Games and the 1992 Earth Summit.
Rio's abundant lakes and vast coastline make it ideal for water sports, but heavy investments are needed to clean up years of pollution.
The Rodrigo de Freitas lagoon suffers from draining of sewage from nearby neighborhoods that is the subject of complaints by the rowers and sailors who use it. The Guanabara Bay is polluted and heavily used by oil tankers. The government says it will invest $4 billion to clean up the waters.
Rio needs to build several complexes including the Olympic Village that will provide some 25,000 of the 48,000 hotel rooms needed for the Games.
Even with these facilities, the city still plans to provide a considerable amount of the total accommodation through cruise ships docked in rundown port areas of Rio.
A proposal to spend $210 million to revitalize the port area is stalled.
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Trader disclosure: On October 2, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (C) Calls; Najarian Owns (FFIV) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (INTC) And Is Short (INTC) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PEP) Call Spread; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (CSCO), (MSFT), (USO); Finerma's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (UNG); Finerman's Firm Owns (BDX); Finerman's Firm Is Short (TLT); Finerman's Firm Owns (BAC), (BAC) Calls, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (WMT); Finerman's Firm Is Short (XRT); Finerman's Firm Is Short (BWA); Finerman's Firm Is Short (USO); Seymour Owns (ABV); Seygem Asset Management Is Short (PBR); Seymour Owns (EWZ); Seygem Asset Management Owns Lukoil Shares
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