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Connected Economics of the Soccer World Cup

Posted by: Team TechMahindra On July 04, 2014 02:34 PM

This World Cup is the most expensive one yet, with estimates of Brazil’s total expenditures hovering around $14 billion—including more than $3.6 billion spent on 12 new and renovated stadiums. That’s about three times the estimated price tags for the 2010 World Cup in South Africa, which cost a total of $3.9 billion with $1.3 billion in stadium construction work.

But the big question everybody is asking: What did Brazil gain? As with any major sporting event, what are the long-term economic benefits of hosting the World Cup?

Projected gains to the Brazilian economy vary from $13.6 billion to $10 billion. And it’s evident in the fact how despite various concerns, the World Cup has gone smoothly and resulted in Brazilian President Dilma Rousseff, whose approval ratings have slid in the run-up to the Cup and who faces re-election in October, gaining ground among voters after months of declining support, according to a new poll published this Wednesday by Brazilian polling firm Datafolha. Anti-World Cup protests by Brazilians opposed to the expense of hosting the event have all but fizzled out.

Expectations were low. They have been exceeded

A study by Ernst & Young and Brazilian think-tank FGV projected that financial gains from the tournament will amount to five times the government's investment, creating millions of jobs and ultimately adding more than $50 billion to the country's economy.

In the short term, the tournament is expected to draw an estimated 3.7 million tourists. FIFA, global soccer's governing body, said last week that the World Cup would generate revenue of $4.5 billion, according to Brazilian wire service ITAR-TASS.

And if Brazil takes the trophy home, it’s expected to reap more financial rewards like every other country that has won the tournament since 1974, except one. A football World Cup victory has always resulted in a short-term rise in stock prices in the winning nation.

With an expectation of a net 300,000 extra visitors this year compared with 2013, the government is expecting a windfall of 6.7 billion raised from Tourism-related earnings.

Host cities scored with some new infrastructure - Natal got a snazzy airport, Brasília, Curitiba and Salvador built new motorways to their airports and taxi drivers say traffic has eased thanks to a new road infrastructure. You only take taxi drivers seriously on two occasions – either predicting games or saying something positive about their city – because they usually are the biggest cynics.

The world cup has resulted in a rally in equities as the Brazilian Ibovespa Index rose the most among the world’s major benchmarks as oil producer Petroleo Brasileiro SA led a rally in state-controlled companies.

Brazil is immersed in the World Cup, but its biggest test is yet to come. August 2016, when Rio de Janeiro will host the Summer Olympics and the country promised big – pledging to host "Green Games for a Blue Planet." Specifically, the city of 6.3 million said it would use clean energy, clear the city's clogged streets, preserve its natural spaces, and upgrade its "favelas"—poor neighbourhoods full of ad-hoc infrastructure—to more-urbanized spaces with functioning utilities, public transportation, and other amenities.

By 2016, Brazil has the potential for overhauling Rio's notoriously traffic-choked roads by adding trains, buses, and public bike-share programs. And what better beginning than a football World Cup which is bringing back the carnival atmosphere in the country.

Tags: Brazil Diaries 2014
 
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