World Cup: Economic Benefit for Brazil Seen as Muted

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LONDON—The soccer World Cup in Brazil on its first evening not only put a spotlight on the sport and its passionate fans, but also the economic and social frictions in the host country.

Protesters in the streets of Sao Paolo and Rio de Janeiro demonstrated against the high cost of the World Cup for Brazil, estimated at $14 billion, alleged corruption and spoke out in favor of more spending on schools, hospitals and other nonsporting infrastructure.

Proponents of the Cup tout the expected economic benefits, while critics highlight the risks of empty stadiums after the event and the social cost.

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Experts say it is difficult to estimate the true economic and other impact of big sporting events, but many have said boosts often end up being short-term.

‎Moody's Investors Services‎ before the Brazil tournament predicted its economic effects for the country would be "fleeting."

Lost workdays and less business activity during the Cup will offset job creation, tourism growth and added spending, it argued.

Compared with the estimated costs, Moody's estimated the economic stimulus at $11.1 billion, saying these effects "pale before Brazil’s $2.2 trillion economy."

‎Overall, the Cup will generate only 0.4 percent of additional gross domestic product for Brazil over a 10-year period, the firm estimated.

In a report entitled "2014 FIFA World Cup Brazil: A Quick Score for the Beverage, Travel, Construction and Broadcast Sectors," it said those industries would see temporary gains.

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"Some hope hosting the World Cup will help lift Brazil out of economic slowdown, but the associated economic activity ultimately pales before the country's $2.2 trillion economy, the usual levels of investment spending and the annual revenues of most companies," wrote Moody's analyst Barbara Mattos. "The 32-day event will provide short-lived sales increases that are unlikely to materially affect earnings, and disruptions associated with traffic, crowding and lost work days will take a toll on business."

The roughly $11 billion in spending on stadiums, airports and other infrastructure has been a positive for infrastructure providers, the figure accounts for only 0.7 percent of overall planned investment in Brazil for the 2010-2014 period, and most of the impact has already been felt, Moody's highlighted.

It said though that global media exposure is one potential benefit for Brazil giving that the World Cup is the world's biggest single-sport event. In 2010, estimates said that 1 billion people watched at least parts of the Cup.

‎Mattos warned though: "While the World Cup offers potential reputational benefit, Brazil's image would be marred by a reprise of the social unrest seen last June during a run-up event, the Confederations Cup, as it would be if needed infrastructure were not ready in time, with negative implications across sectors."

Brazil's government has cited a study from accounting firm Ernst & Young from a couple of years ago that predicted $50.4 billion (112.8 billion real) in additional economic activity for Brazil between 2010 and 2014 related to the World Cup. But many infrastructure projects, other than the stadiums, were already included in a government infrastructure plan.

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In total, an additional $63.3 billion (142.39 billion real) would flow into the country from 2010 to 2014, generating 3.63 million jobs per year and $28.4 billion (63.48 billion real) of income for the population, the study said.

"As the World Cup is a one-time event, most of its systematic‎ impacts will not be permanent," Ernst & Young said. "In fact, once the investments have been concluded and the World Cup has taken place, the positive impacts will remain based on the stakeholders' ability to benefit from the event's opportunities and legacies."‎

According to estimates, South Africa spent about $3.9 billion on the 2010 Cup. The total direct economic benefits were projected to be approximately $21.3 billion, with 159,000 new jobs created. But the South African economy has slowed since the Cup.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

 

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