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The Brazilian economy is set to lose out from the Olympic Games organised in Rio de Janeiro this month.

The sport event is usually considered to benefit a host country’s economy, increasing growth and employment. But a report from Euler Hermes finds that the short-term benefits of hosting the Olympic Games are too small to offset the negative impact of inflationary pressure and increased business bankruptcies.

Business insolvencies are set to increase by 5% in Rio alone. In the years leading up to the Olympic Games, the number of new companies – particularly in the construction and services sector – increased, but many are not expected to survive much longer afterwards, if they survive that long at all. The risk of failure affects strong and well-managed companies as well as week ones due to the degrading economic situation and credit conditions.

“The credit granted to companies is contracting and the interest rates are extremely high. For earmarked resources, the interest rate stands around 12%, but for non-earmarked resources it goes up to 30%. The situation is thus very challenging for Brazilian companies today, especially for the smallest ones,” Daniela Ordonez, Latin American economist for Euler Hermes, tells GTR.

Euler Hermes forecasts a hike of 12% in insolvencies for micro enterprises. In general, increased investment projects and tourism linked to the event will only add 0.05 percentage points in real growth to Brazil’s GDP, which is expected to fall by 3.5% in 2016.

“While these increases in jobs and tourism look good on the surface, they are just not enough to offset the severe economic turmoil that has plagued Brazil since before the Olympics. Some issues, like inflation, could even be significantly exacerbated by the games” says Ordonez “Infrastructure investment and public spending alone has further increased public debt by 0.04 percentage points of GDP, with the state of Rio de Janeiro’s debt spiking by 17%.”

The country’s already suffering economy is also feeling the impact of hosting two major sport events in the space of two years. Hosting the 2014 World Cup and the Olympics back-to-back has had a negative effect, with inflation increasing by around 1 percentage point in 2016, partially due to the separate events’ impact on inflationary pressure, and partially as a result of the short time lapse between them.

“Even without these sport events the challenges would be big. This is an additional challenge that adds to an already long list,” explains Ordonez. “The biggest challenge for the Brazilian economy is to address the structural imbalances between demand and supply. “Over the past years, domestic demand has increased very rapidly, but the national production has not been capable to meet it. This is what has generated failures, bottlenecks, inflation and external deficits. It is a question of structural equilibrium – this is what makes the difference between these sport events being positive or negative for an economy,” she says.