A boy plays with a ball in a street of Cidade de Deus (City of God) favela of Rio de Janeiro.
A boy plays with a ball in a street of Cidade de Deus (City of God) favela of Rio de Janeiro.

World Cup: Money-making or costly folly?

By Chris WRIGHT Time of article published May 26, 2014

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Rio de Janeiro - The World Cup will cost Brazil more than $11-billion, a sum that sparked outraged protests and sent economists dashing for new data on an old question: is hosting global sports events worth it?

The protesters who have taken to the streets, sometimes violently, say Brazil would be better off spending on education, health and transport - areas where the gaping divide between rich and poor is most conspicuous in this sprawling country of 200 million people.

But Brazil's leaders say hosting the tournament is about more than building stadiums and throwing a party.

“The Cup is not an economic panacea but a catalyst for Brazilian development,” tourism minister Vinicius Lages told AFP. “It was a key factor behind Brazil finally overhauling its infrastructure.”

He predicted the event would add about $13.6-billion this year to the Brazilian economy - the world's seventh-largest at $2.25-trillion - thanks to a tidal wave of foreign and domestic tourists.

Then there is the long term impact.

According to a 2012 report by consulting firm Ernst & Young and the Getulio Vargas Foundation, a Brazilian economics institute, the cup “will produce a surprising cascading effect on investments.”

The report estimated the Cup and 2016 Olympics in Rio de Janeiro will between them create 3.6 million jobs and add four percentage points a year to economic growth through 2019.

But it also warned that Brazil must ensure the benefits accrue to the entire population.

Ernst & Young said Brazil would be judged on its ability to “capitalise on the Cup's legacies, turning them into permanent assets” thereby “reaching another socioeconomic and structural level.”

The experts are not unanimous.

In March, a report by ratings agency Moody's forecast the World Cup would have a negligible effect on the economy, given Brazil's sluggish growth since 2011.

Senior analyst Barbara Mattos said the tournament “will provide short-lived sales increases that are unlikely to materially affect earnings.”

Meanwhile, she warned, “disruptions associated with traffic, crowding and lost work days will take a toll on business.”

Studies show little long-term financial gain from sports extravaganzas, said Wolfgang Maennig, an economics professor at Hamburg University in Germany.

“There have been many investigations into the benefits derived from World Cups and Olympics, mostly showing that any benefit is just temporary,” said Maennig.

“For Germany (in 2006) there were high hopes but in the end people said, 'Great event, great fun but did we gain financially? No.'“

Maennig, an Olympic rowing champion in 1988, said Brazil's decision to build some of its shiny new stadiums in far-flung host cities with no discernible footballing tradition was “politically understandable - but absurd in terms of pure economics.”

Then there are the intangibles that are impossible to calculate accurately.

Maennig said a repeat of mass protests like those that marred last year's Confederations Cup, a World Cup warm-up tournament, could nullify any financial gains by damaging Brazil's brand.

“If there is violence, that will be a huge negative for Brazil's image. But if Brazil can show it is a friendly country, then that would be a huge plus,” he said.

Brazil expects 600,000 foreigners and 3.1 million domestic tourists to attend the tournament, spending an estimated $2 500 (about R25 000) each.

If things go well, there is plenty of room for long-term tourism growth.

Despite world-famous attractions ranging from its rainforests to its beaches to its Carnival, the country received just six million tourists last year. The Eiffel Tower alone received two million more.

Professor Rafael Alcadipani, a World Cup specialist and the Getulio Vargas Foundation, pointed out that the economy was struggling compared to when Brazil was awarded the Cup seven years ago.

“Then, it seemed Brazil was finally getting its act together. But people underestimated the costs, the public cash thrown at stadiums of doubtful long-term value,” he told AFP.

“I think a more modest and concentrated event would give a better result.”

President Dilma Rousseff, who is up for reelection in October, says Brazilians should welcome the legacy of Cup-related investment.

“Nobody coming here will put the airports, ports, urban mobility schemes, stadiums in their suitcase when they leave. This is our legacy,” she insisted.

But her chief of staff Gilberto Carvalho admits in the wake of ongoing protests that the government has been “incompetent in having a dialogue with Brazilian society regarding the World Cup.”

Lages called for patience on all sides.

“We must not over-inflate expectations. This is about long-term planning,” said the tourism minister.

Sergio Bampi, a computer science professor and logistics expert at Rio Gande do Sul federal university in the southern host city of Porto Alegre, meanwhile urged realism.

“The thing many people don't realise is that Brazil does things in its own fashion. This is not Europe,” he told AFP. - Sapa-AFP

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