CAN HOSTING A WORLD CUP BENEFIT THE ECONOMY OF BRAZIL?

CAN HOSTING A WORLD CUP BENEFIT THE ECONOMY OF BRAZIL? 1

CANHOSTING A WORLD CUP BENEFIT THE ECONOMY OF BRAZIL?

Worldcup is arguably the most followed global mega sporting activity.There are usually thirty-two national football teams that participatein the event that take place over a period of two months. Despite,thirty-one teams playing qualifications matches prior to the mainevent, the host nation is given an automatic spot in the groupstages. As Brazil was awarded the privilege by the officials of theworld governing body FIFA on 2007 to host the 2014 world footballtournament, most of the country’s soccer fanatics rejoiced but foreconomists, there were some eyebrows to be raised. As far as footballwas concerned, the state would be the center of global attention, andthere was no doubt about that. However, as the football worlddescended on the country in 2014 their economy was to experience boththe negative and positive impacts. The drawbacks would exceed thebenefits hence the event cannot help reshape the economic status ofBrazil. Brazil would not reap from another world cup because of thedemanding FIFA rules, temporary employment opportunities and thediscouragement of regular tourists.

Discussion

TheFIFA exception rules

WhenBrazil submitted documents to the world football governing body backin 2007 showing an interest in playing host to the colorful event,there were rules and privileges that would accompany the award. Thecountry and the organization signed various agreements that wouldgive FIFA more control over the generated profit. These treatiesensured removal of the bureaucratic obstacles to the organization’sbenefit. A FIFA’s statute known as the General World Cup Lawdemanded Brazil to make sure that the event is profitable and had todo everything.¹The government indulged in thorough renovations and other preparationduties as agreed in the treaty only for the organization to get awaywith the lion’s share after the events. It left the state’seconomy torn apart since it had to source money from other places tofinance the debts incurred. Additionally, the agreements stipulatedthat no FIFA official would be taxed while entering the country andthat they should not be charged the attendance fee during variousmatches. The idea of the Federation of International FootballAssociation (FIFA) to totally control the event does not auger wellto the nation. Thus Brazil should be discouraged from hosting theevent ever again in the future.

DeterringRegular Tourists

Therewere some regular tourists from whom the government used to earn alot of money and who opted to take a leave out of their usualactivities in Brazil due to the disturbances caused by the events.Likewise, there are those foreign investors who also closed downtheir businesses and preferred to wait for the World Cup to end.²Some cited that there would be violence due to a multitude of people.The distractions caused by the major event led to a loss in some ofthe revenue that the government would generate from these investorsand the regular tourists. Consequently, the issues observed in thestate’s budget would persist.

BusinessesStand Still

Duringthe events, and especially when the Brazilian nation football teamwas engaging in a match, most businesses were closed. There were alsosome municipalities that declared the day a holiday which made eventhe civil servants take a day off. Thus, the economy was negativelyaffected during those days since there was less or no businessactivity going on. There was less inflow of revenues to the statebudget during those days. Therefore, the state should opt out ofhosting the event again in the future to avoid a similar fate.

Misuseof Infrastructure

Duringthe preparation period many infrastructural projects were developedto ensure smooth running of the events.³However, after the World Cup, most of the roads and some of therailway lines were abandoned. It is because some of these roads andrailway lines only lead to the stadiums. When the fields are not inuse the highways are idle thus a manifestation of a waste ofresources. They are being misused by the locals since there are novehicles or trains passing through them on a regular basis. A lot ofmoney was used to construct all these infrastructures and were onlyused for roughly two months. Two months were arguably not enough forthe state to experience a reward of all the efforts thus unable tocontribute positively to the state’s budget.

Lackof a Lasting Business and Employment

Anotherundesirable aspect regarding hosting the event is that despitepresenting employment opportunities especially to the locals, theprivileges were short lived. After the World Cup, most of themeventually went back to their usual state of being jobless. Theopportunities created proved to be unsustainable. There was adownturn in the civil construction and tourism. The fact does nothelp the state’s economy as a result. Likewise, those businessesthat were established to meet the demands of the world event, most ofthem were only useful for the period. For instance, individuals spentheavily constructing five-star hotels and other accommodationfacilities.⁴Most of them did not experience a return on investments and hence didnot contribute positively to the national budget. As a result, moreproblems were added to the existing state of the economy.

Inflation

Personalexpenses are always on the high during such events which leave a markon the inflation levels of the country. These are mostly attributedto the high costs of commodities during the period and theaccommodation fees which most locals are willing to pay. In Brazil,for instance, the personal expenditure of June and July 2014 hit11.57 percent increase from the previous months as a result of 25.33percent increase in the hotel prices. The figures did not scarepeople away rather they were ready to cheer for their teams. Due tosuch inflation, the state economy experienced more issues as before.It was reported that the leaders in Brazil and the budgetaryexecutive committees had made attempts to regulate the prices ofhotels and other commodities during the period in an attempt to curbpotential inflation surge. The consumer prices had gone up beyond thestipulated state’s upper target limit.

Expectationsby the Citizens can be Extremely High

Thegovernment overspends anticipating that many tourists would flock thecountry and help recover the expenses mostly used on renovations ofthe infrastructures.⁵Some of them were the awarding of tenders and contracts to privatefirms to ensure that the event would be a success. Brazil had plannedto recoup the same amount or even higher. It did not consider thatsome of the people who would migrate may not have an interest in theevents. It was reported that some did not even come to watchfootball they had their non-financial activities within thecountry.⁶Also because the country expected a lot of income from the event,they borrowed large sums of money to cater for the preparations. Theyexpected that the finances to be acquired from the World Cup wouldsufficiently settle the debts. However, years later the country isstill not in a position to repay the whole amount obtained fromlending financial institutions thus creating a burden on the state’seconomy. It was reported that there was an increase in the publicdebt among the twelve host cities. Such problems should be a lessonto the country to better off letting a different nation play host.

TheDisplacement of People has Far Reaching Economic Implications

Movingpeople from their usual dwelling places to construct football fieldsdid not only affect these individuals socially but also economically.Most of the evicted people claimed that they did not receive anycompensation from the government and they had to find new residentialplaces on their own.⁷Those who did not have other means of generating money to cater forsuch expenses ended up involving in criminal activities. The federalsecurity with the help of the government had to intervene.Additionally, for those who received compensation from the state itwas clear that the state’s budget was affected thus having anegative impact rather than improving it. Such people and others inthe country would not wish their country to play host to such anevent ever again in their lives.

PopulationIncrease

Asa result of the country hosting the event, there were differentpeople who immigrated both temporarily and others permanently.Therefore, an increase in population was inevitable. Some married thelocal citizens who they met during the event and together played arole in the multiplication of the current population. The governmenthad no option but to include them in its budget. The creation of anextra burden on it added extra misery to the existing problems of theeconomy. Hence, Brazil should avoid participating in the draw whichselects the nations to host the event.

Accidents,Deaths, and Strikes

DespiteFIFA controlling the World Cup, it relieves itself from some of theduties which require lots of finances. Various incidences of deathsand accidents were reported both before the event kicked off andduring matches.⁸While constructing and doing other renovations, the country had todeal with all expenses regarding injuries and deaths of the workers.There were fewer organizations that intervened especially onfinancial matters. The state had to seek financial help from itsbudget reserves to cater for the undesirable incidences. During thematches too, Brazil took the sole obligation of dealing withaccidents and deaths of the fans which created a burden on thebudget. There were also strikes as a result of some constructionworkers citing to be underpaid.⁹The government had to intervene and control them by all means.

Extraexpenditures due to some Social Factors

Therewere people who moved into the country with ill motives. Prostitutes,thieves, terrorists among others were present in Brazil during theWorld Cup event.¹⁰The prostitutes in a way affected the state’s economy negatively.They pose health threats in that there was the possibility of anincrease in the spread of sexually transmitted diseases. The healthsector had to be funded some time later to cater for the victims.Others came targeting to kill people taking advantage of thecongestion. They target the major event to seek revenge since it isarguably difficult to attack them while in their home nation. Otherstook advantage of people concentrating on the events on the hostinggrounds and break into business entities belonging to otherindividuals.

Allthese created security threats which might not have been experiencedif the global event was not held in Brazil. It added problems to theexisting issues in the current budget. Another social aspect thatoccurred and led to the deterioration of the economy is that itintroduced imbalance in the sharing of the country’s resources.¹¹Only a certain percentage of people benefited from the event. Mostlythose who were skilled and those who own properties and otherbusinesses enjoyed the financial benefit of the Word Cup. The restwere left poor even after experiencing much inflow of money andpeople in the country. The imbalance in the distribution of theresources generated would add more problems to the current state ofthe economy. All these social factors are problematic hence the eventcannot help in the growth of the Brazilian economy.

Possibilitiesof Social Unrests in the Aftermath

Theimpact of inflation and loss of employment due to minimal activitiesin the area led to public demonstrations. It became difficult topurchase the usual commodities since people had spent a lot duringthe World Cup and others had been relieved of their duties. Therewere strikes in Brazil after the event especially in major sectors ofthe economy.¹²Those who were working in the tourism and construction departmentsand had been sent home could not put up with their situations. Othershad not saved enough to cater for their future expenses since theythought they would persist in their employment for the foreseeablefuture. Thus, they reached a level of blaming the government whichled to public demonstrations and other forms of unrests in thecountry. The state had to intervene to avoid further damages whicheventually affected its economy. After undergoing such experiences,Brazil should avoid being attracted by the prospect of hosting theevents again in future.

However,there are positives that can be drawn from the honor. The incomegenerated from tourism would help boost the economy. The tourists whoarrived for the World Cup were taxed as they cross the borders andalso as they attended various matches. Likewise, Brazilians were alsocharged attendance fees and this generated income for the country.Another way that the state boosted its revenues from the event isthrough the charges to televise the World Cup. These are a fee thatvarious media channels pay the government to acquire rights totransmit the event to their customers. Additionally, the same mediachannels improved the global image of the hosting nation since theyhave to show the wealth of the country during the advertisements thusattracting more people.¹³Other ways include taxing the skilled personnel who sought tenders inthe country during the renovations and constructions before thecommencement of the main event.

Employmentopportunities were realized in the country. Those who were joblesssecured occupations whether casual or permanent in variousdepartments as the preparation for the events got underway. Therewere those who were absorbed in the catering department, others inthe construction sector and others in entertainment.¹⁴During these times such individuals improved their living standards.They also bettered their purchasing power hence boosted the status ofthe economy. Also, the event attracted other nations to form tradepartnerships or agreements with the host nation especially theneighboring ones and the participating countries.¹⁵After the events, Brazil benefited from them since they offeredfinancial advice and other beneficial services. Previously, theserepublics had offered to assist Brazil with certain preparationprocedures. They offered extra accommodation services and workforceto ensure that the construction work has been completed within thestipulated time.

Conclusion

Despiteall these positives drawn from hosting World Cup, it is obvious thatthe drawbacks were more than the advantages. Their effects alsooutweighed those of the benefits accrued. The country should desistfrom hosting the World Cup due to such factors like the rules thataccompany the privilege to do so. It does not have much control ofthe profits generated despite being pressed to make sure that theevent is profitable. Nonetheless, even if there is the creation ofemployment, it is only for a short while, and the individuals live tomourn months later. It affects the economy and the emotional statusof these people. The roads and railways which took a lot of effortand money for the government to build are only used for approximatetwo months. They are transformed into waste since they wereconstructed for specific purposes. The state too experiencedifficulties in recovering all the money spent in the preparations.Still, there is social evil that accompanies the honor to host theworld event. Crime, prostitution, violence, and terrorism destabilizethe state’s economy. Prostitution lead to the spread of HIV/AIDSand the government has to play a part in controlling that in thefuture. The criminals must also be hunted, and the issue of terrorismaddressed. All these requires state funding which would eventuallyaffect the budget reserves of Brazil. All these drawbacks thataccompany playing host to such a major universal footballing eventshould teach Brazil a lesson and should let another nation play hostin the future.

Bibliography

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Baumann,Robert, and Victor Matheson. &quotInfrastructure investments andmega-sports events: comparing the experience of developing andindustrialized countries.&quot (2013).

Cottle,Eddie, and Mauricio Rombaldi. &quotLessons from South Africa’sFIFA World Cup, Brazil and its Legacy for Labour.&quot Wits,The Global Labour University, en: http://www.global-labour-university.org/fileadmin/Summer_School_2014/EddieCottleCETIMbook2013FINAL. pdf(2014).

DePaula, Marilene. &quotThe 2014 World Cup in Brazil: Its legacy andchallenges.&quot (2014).

Dodd,Carly. &quotEconomic Policies in 20th Century Latin America: A CaseStudy on Brazil and the 2014 World Cup [10th grade].&quot (2013).

Gursoy,Dogan, B. Sharma, A. P. Netto, Manuel Alector Riberio, M. Yolal, andT. Lee. &quot2014 FIFA World Cup in Brazil: local residents`perceptions of impacts, emotions, attachment, and their support forthe event.&quot In The5th Advances in Hospitality &amp Tourism Marketing and Management(AHTMM) Conference, Beppu, Japan, 18-21 June 2015.,pp. 209-215. Washington State University, 2015.

Korstanje,Maximiliano E., Rodanthi Tzanelli, and Anthony Clayton. &quotBrazilianWorld cup 2014: Terrorism, tourism, and social conflict.&quot EventManagement18, no. 4 (2014): 487-491.

Lopes,Luiz AC, Matheus M. de Oliveira, and Carlos AP Soares. &quotTheEffects of the 2014 World Cup in Real Estate Market in Rio de Janeiroand São Paulo.&quot InternationalProceedings of Economics Development and Research69 (2014): 12.

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1^ De Paula, Marilene (The 2014 World Cup in Brazil: Its legacy and challenges, 2014). 5

2^ De Paula, p.9

3^ Gursoy, Dogan, B. Sharma, A. P. Netto, Manuel Alector Riberio, M. Yolal, and T. Lee (2014 FIFA World Cup in Brazil: local residents` perceptions of impacts, emotions, attachment, and their support for the event, 2015). 2

4^ Lopes, Luiz AC, Matheus M. de Oliveira, and Carlos AP Soares (The Effects of the 2014 World Cup in Real Estate Market in Rio de Janeiro and São Paulo, 2014) 12.

5^ Lopes, Matheus and Carlos, p.15.

6^ De Paula, p.7

7^ De Paula, p.17

8^ De Paula, p.7

9^ Cottle, Eddie, and Mauricio Rombaldi (Lessons from South Africa’s FIFA World Cup, Brazil and its Legacy for Labour. Wits: The Global Labour University, 2014), p.12

10^Korstanje, Maximiliano E., Rodanthi Tzanelli, and Anthony Clayton. &quotBrazilian World cup 2014: Terrorism, tourism, and social conflict.&quot Event Management 18, no. 4 (2014): p.489

11^ Dodd, Carly (Economic Policies in 20th Century Latin America: A Case Study on Brazil and the 2014 World Cup, 2013), p.11

12^ De Paula, p.19

13^ Gursoy, Dogan, B. Sharma, A. P. Netto, Manuel Alector Riberio, M. Yolal, and T. Lee (2014 FIFA World Cup in Brazil: local residents` perceptions of impacts, emotions, attachment, and their support for the event, 2015), p.2

14^ Preuss, Holger, and Norbert Schütte. &quotStructures of an economic impact: The case of the FIFA Football World Cup 2014 in Brazil.&quot In 7th INTERNATIONAL SPORT BUSINESS SYMPOSIUM, (2016): p.40

15^ Avsar, Veysel, and Umut Unal. &quotTrading Effects of the FIFA World Cup.&quot Kyklos 67, no. 3 (2014): p.316