Eduard Alex Doa

MGMT 395-101
10 Feb 2014
The Economic Impact of the World Cup on Brazil

In approximately four months, Brazil will have the opportunity to host one of the highest
profile sporting events in the world the FIFA World Cup. This singular sporting event that
happens every four years has a lasting economic impact on its host country; however, this years
host will undoubtedly be hurt by the event, rather than having the event help its economy. There
are different costs involved in hosting the world cup, ranging from fiscal to social. It is pertinent
to take a closer look at these different costs to understand why the event will eventually hurt the
Brazilian economy, despite the initially projected benefits from the globally relevant event.
The constraints placed on a country by the World Cup are varied and many. In order to
successfully host the event, each of the twelve host cities needs to be able to meet increased
demands, which can be summed up in the following categories: Energy, arterial transport
(highways, airports, etc.), event infrastructure (stadiums, fan parks), hospitality system, safety,
urban planning (public utility services, urban operations, quality of city streets, public
transportation, operations under adverse conditions), and support services (Ernst and Young, 28).
These demands, as they are the basis of success for the 2014 World Cup, are founded from
investments of approximately R$ 14.54 billion
1
, and are expected to impact the host cities local
GDP by R$ 7.18 billion
2
(Ernst and Young, 9).
These effects were expected to trickle down into, both directly and indirectly, and ideally
have positive influences on the socioeconomic status of Brazil. The impacts from the World Cup
are from several different, interconnected aspects, which lead to a domino effect from the direct
actions in preparation of the World Cup. The investments, operation of the event, and spending

1
US$ 6.03 billion
2
US$ 2.98 billion
Eduard Alex Doa
MGMT 395-101
10 Feb 2014
by visitors represent demand normally not seen by the Brazilian economy; this will procure an
increase production, employment, income, and tax collection. However, these are not the only
tangible effects; due to the interconnected nature of the economy, other sectors would ideally
benefit from these new demands and requirements (Ernst and Young, 10). Brazils Ministry of
Sports claims 120,000 jobs will be created per year by the preparation of not only the World
Cup, but also the 2016 Summer Olympics. The industries that are expected to benefit the most
are tourism, construction, and electricity industries (Sverrisson). Over R$ 26 billion
3
is expected
in revenue from the 2014 World Cup, which is 20 times the revnue earned by the previous World
Cup host, South Africa. The Brazilian Institute of Tourism estimates over 600,000 tourists will
travel to the country for the Cup, bringing with them an expenditure of approximately R$ 6.2
billion
4
(Malln, 4 Sept 2013).
There are several other benefits that will impact the local economy, which are thought to
make an impact in the long-term. As Brazil has grown and stabilized over the past two decades,
the new infrastructure required by FIFA to host the Cup will stay; this includes the expanded
airports, improved transport systems, and better telecommunication services. Although
necessary for the Cup, it is unlikely that these improvements would be as timely without it. In
addition, due to the long-term development, other key industries such as international trade and
new technologies may benefit from the influx of global businesses (Megale and Proni). It is hard
to estimate the hard economic impact data, but it is highly probable that these opportunities will
be taken advantage of, if not by the Brazilian people, then by foreign investors.
All of these perceived benefits imply that the initial outlook for the Brazilian World Cup
was extremely high. However, these appear to be but a pipe dream due to the current state of

3
US$ 10.8 billion
4
US$ 2.6 billion
Eduard Alex Doa
MGMT 395-101
10 Feb 2014
preparation with a short four months to go until the Cup. In a blog post earlier this year,
reputed Brazil-watcher Andrew Downie wrote that five citiesBrasilia, Fortaleza, Manaus,
Salvador and Sao Paulowont have the promised tram lines, express lanes for buses or metro
links ready, according to Brazils Federal Audits Court (Peters). In addition, five of the
stadiums are still under construction, including the Amazonia Arena, where another worker was
killed the third construction-related death in preparation for the Cup hinting at further delays
(NY Daily News).
The current states of the stadium venues and city transportation are not the only causes
for concern. The expected influx of tourists may be a gross overestimation as well. While
many tourists will be attracted to a sports mega-event, there will be others who would normally
travel but are frightened away by the anticipated crowds and higher prices. It is extremely
difficult to determine how much crowding out; actually takes place when an area hosts the
Olympic Games. However, a 1999 study by Philip Porter, Mega-Sports Investments: A
Critique of Impact Analysis, found that gate arrivals to the Atlanta airport during the 1996
Summer Games were identical to gate arrivals in the same months in 1995 and 1997, implying
that quite a few tourists were crowded out by the 1996 Games (Zimbalist).
This number may further decrease by the social upheaval that the World Cup is causing
in Brazil. In June 2013, Brazil, a country where massive protests were but a myth, escalated into
a series of protests, vandalism, violence, and police crackdowns, due to the price of bus tickets.
The unrest has been contributed to expenses in preparation for the World Cup were double the
budget, with the extra being reallocated from education, healthcare, and public transportation
funding (Malln, 18 June 2013).
Eduard Alex Doa
MGMT 395-101
10 Feb 2014
The dissatisfaction of the cup has even spurred a new expression among Brazilians:
Imagina na Copa, which translates to imagine during the Cup, which implies the Brazilian
peoples concerns are much higher than probably anticipated (Antunes). If this kind of attitude is
common among locals months before the event, it is unlikely that there will be a positive change
made in time to create a pleasant and exciting atmosphere for the games.
Furthermore, these promised benefits are fairly limited. First off, the benefits, no matter
how great, are garnered mainly by the twelve host cities, leaving the rest of Brazil to try and
catch up; and even there, thousands of jobs that were created in preparation for the Cup will no
longer be needed, limiting the legacy the Cup is ideally supposed to achieve. In addition, the
infrastructure investment, while only 5%
5
of the total of Brazils Growth Acceleration Program,
is causing reductions in public spending, such as the aforementioned hospitals. Lastly, while the
construction may be lucrative for the time being, the stadiums could become expensive
paperweights; these potentially unused installations known as white elephants are similar to the
wasted assets invested in by Athens during the 2004 Olympics (Megale and Proni). There is
already foreshadowing that the behemoth sports complexes may be a waste; the site in Brasilia,
the nations capital, which is expected to draw its full capacity of 73,000 fans, may turn into
R$1.3 billion empty lot, as a game between two popular local soccer teams drew but 801 fans at
the end of March 2013 (Colitt).
Although the several studies commissioned by the Brazilian government imply a
substantial economic impact within the ten-year period that started in 2010, the costs seem to be
far outweighing initial estimates, the majority of the income will come from boosts in tourism
which, in and of itself, is not guaranteed by hosting the Cup. This further cements the idea that

5
R$25 billion = approximately US$ 10.5 billion
Eduard Alex Doa
MGMT 395-101
10 Feb 2014
World Cup, like other sports mega-events, are inherently harmful to the hosting community.
This is especially prominent in Brazil.
While there are numerous positive impacts that are expected, unfortunately, that is all
they are expected. The majority of the Brazils income for hosting the World Cup would be
from tourism a variable that can be estimated, but not controlled. The rest of the positive
impacts, such as the improvements to infrastructure, are beneficial to the growing country, and
are likely to encourage continuous growth throughout the country.
However, these positive impacts are slight compared to the capital expenditure of Brazil
in preparation for hosting the Cup, as well as the overall cost. As many as eight of the stadiums
are expected to be white elephants (Rueda), and the cost of putting on the Cup is continuously
increasing (Reuters). The increase of jobs is temporary, and may cause a shift back into poverty
for those who escaped living in the Brazilian favelas by working on construction or infrastructure
improvement jobs. Funding for hospitals and other local community needs is being siphoned for
the Cup, inciting riots and uprisings both new events on Brazilian soil. These activities do not
bode well for the World Cup, and by extension, the next mega sports-event to be hosted by
Brazil, the 2016 Summer Olympics.
Without a doubt, there will be an impact on the Brazilian economy due to Brazils
hosting of the 2014 FIFA World Cup. However, it is likely that the negative impacts, both
socially and economically, will far outweigh the anticipated positive ones.

Eduard Alex Doa
MGMT 395-101
10 Feb 2014
Works Cited
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Colitt, Raymond. "Brazil World Cup Kick-Starts Billionaire Boon as Farmers
Lose." Bloomberg.com. Bloomberg, 28 May 2013. Web. 10 Feb. 2014.
"Economic Impact Of Hosting The World Cup For Brazil." SportsBusiness Daily. American City
Business Journal, n.d. Web. 07 Feb. 2014.
Maennig, Wolfgang, and Stan Du Plessis. "World Cup 2010: South African Economic
Perspectives And Policy Challenges Informed By The Experience Of Germany
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Malln, Patricia R. "2014 Soccer World Cup: Brazil Predicts Revenue 20 Times Over South
Africa's In 2010, Experts Skeptical." International Business Times. IBT Media, 4 Sept.
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Megale, Calo, and Marcelo W. Proni. "What The World Cup Will Do To Brazil's
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NY Daily News. "Third Worker Killed at World Cup Stadium in Brazil ." NY Daily News. N.p.,
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Pillay, Udesh, and Orli Bass. "Mega-events as a Response to Poverty Reduction: The 2010 FIFA
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Reuters. "Soccer-Brazil World Cup Stadiums on Track, but Costs Soar." Reuters. Thomson
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Eduard Alex Doa
MGMT 395-101
10 Feb 2014
Rueda, Manuel. "Why Brazilians Are Angry Over World Cup Spending." Fusion. Yahoo!-ABC
News Network, 9 June 2013. Web. 09 Feb. 2014.
Sverrisson, Sverrir. "The Economic Impact of Brazil's 2014 World Cup and 2016
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