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We take a look at how the South American nation can benefit from hosting this year's World Cup and the Olympic Games in 2016.
Alex Miller reports

world-cup


Host nation Brazil are the favourites to win the World Cup for a record sixth time in July, but whether or not the Brazilian football team manages to secure what would be a popular victory, the country itself will have enjoyed a four-week period with the eyes of the world fixed on them.

Aside from the Olympic Games (which Brazil will host in 2016) there is no other sporting event that can generate such global interest. The World Cup is quite simply the most-watched single sporting event in the world.

According to official FIFA reports, the total TV viewing ratings for the 2010 World Cup reached 3.2 billion people around the world – 46.4% of the global population at the time and an 8% rise on the 2006 FIFA World Cup in Germany. Estimates suggest the 2014 event will have even bigger ratings.

The tournament will serve as a gigantic advertising platform to boost the profile and prestige of the nation – and the financial benefits of such a platform cannot be overestimated.

Tourism boost

The tourism industry can expect a boost, although many economists believe there is unlikely to be any significant economic gain in this area for Brazil in the short term.

For established holiday destinations such as Brazil, visitors are 'crowded out' during the June and July of a World Cup year. Although official estimates suggest 600,000 tourists are expected to travel to Brazil during the event, injecting $3bn into the economy, direct gains from leisure and business visitors are more likely to become more pronounced in the years following the World Cup and Olympics Games. The Brazilian Institute of Tourism estimates Brazilian revenues of $11bn in the short-term.

The BBC reports that the final cost of the Brazilian World Cup is estimated to be near $15bn, most of which will come out of public funds. There has been a great deal of anger in Brazil over World Cup spending, particularly over the runaway construction costs. 

Nonetheless, the gain for Brazil is that the World Cup has brought forward projects and modernisation in a far shorter time period than would have been expected without the tournament.

The new infrastructure and modernisation of many of the nation’s cities should support economic development – but, again, this will be better measured in years rather than in months.

Economists expect selected stadia in Brazil to catalyse urban economic and real estate development. The most successful will be those with well thought-out business, destination and economic development strategies. The greatest beneficiaries are likely to include Arena de Sao Paulo (Sao Paulo), Arena Pernambuco (Recife) and Estadio Pantanal (Cuiaba).

Structural problems

Analysts from Capital Economics, however, believe the event will provide little boost to the economy because crucial structural problems including the construction of planned roads and airports have yet to be addressed, while efforts to 'clean up' Brazil's slums have resulted in ongoing anti-World Cup protests and clashes with police.

Brazil’s minister of sport Aldo Rebelo lists a series of expected benefits from the World Cup including $12bn investment in urban transport, ports, airports, stadiums and tourism infrastructure, but admits that many of the public infrastructure projects – other than the stadiums – were already included in the government’s general infrastructure plan.

Meanwhile, ratings agency Moody’s says the World Cup will not boost Brazil’s sovereign credit rating or that of most of its companies.

Investment

Barbara Mattos, an analyst with the agency, doesn’t believe the tournament will have a substantial positive effect on the country’s $2 trillion economy: 'The Brazilian economy is very large so, because the duration of the World Cup is limited and also the investment is limited to certain cities and or states, the impact is not that large.'

Walter Boettcher, chief economist at analysts Colliers International, adds: 'If you wish to promote a country and its main cities as a large corporate might promote its own brand, hosting a World Cup or any other mega-event would deliver success. 

'In contrast, if you wish to make a commercial profit, or if you want to increase popular support in your country, ample evidence suggests there are far easier ways to achieve these very different goals.'

Hosting the World Cup is proven to boost to the chances of the home nation, meaning Brazil could well land a sixth tournament win before they feel any economic benefits.

Last updated: 12 Jun 2014