Soccernomics: FIFA World Cup 2014 economics

SOCCERNOMICS

An insight into the economics of the FIFA World Cup 2014 and other Mega Sporting events

BRAZILIAN ECONOMY: AS IT STOOD

• At the 7th rank globally with a GDP of US$ 2.246 trillion

• Tremendous Absolute GDP figures

• The GDP growth has been very unstable over the last ten years

• The 2014 FIFA world cup and the summer Olympics of 2016 ensured an upward graph of the amount invested in Brazil through FDI

• Sudden spurt in 2003 pertaining to the announcement of hosting WC 2014

• Constant from 2006

FACTS AND FIGURES

$13,000,000,000

EXPECTATIONS The investment and construction would

create thousands of new jobs and investment opportunities would multiply.

It would attract thousands of tourists who will pump millions into the economy by spending on food, entertainment and accommodation.

Worldwide media attention would enable Brazil to brand itself once and for all on the global stage as a vibrant, rich, diverse, and sophisticated country

It would accelerate the economic boom and convert the country from an emerging market to a developed one.

$90,000,000,000

Aldo Robelo,Minister of SportsBrazil

REALITY CHECK Germany 2006-15 year impact

under $5 billion.

South Africa 2010 revenue-$500million. $900 million estimated.

World cups generate very little revenue compared to the expenses.Most of which goes to FIFA.

Issue of white elephants

ATHENS, 2004

$124 million per year maintenance cost

Arena da Amazonia

• Capacity 40,000

• Will host Nacional Futebol Clube, only 1,500 spectators on an average.

$250,000 per month

Tourist issue

• Brazil already a tourist destination. Rio de Janerio most visited city in southern hemisphere with 2.8 annual tourists

Athens 2004, 10% drop in tourists from 2003 to 2004.Beijing 2008. estimated less tourists in 2008 than in 2007

Look at the Past:South Africa 2010

Was supposed to be a major boost for the developing African Nation

ExpensesTotal $3 billion spent on the World Cup:

Transport was the biggest cost, with $1.3 billion $1.1 billion on building and upgrading stadiums

alone

Only 16% of expenses were paid by foreign sources, such as FIFA Organising Committee, the media, sponsors and broadcasters.

Rest all came from the public funds.

Concessions to FIFA“The concessions that South Africa had to give to FIFA were simply too demanding

and overwhelming for us to have material monetary benefits”, Adrian Lackey spokesperson for the South African Revenue Services (SARS).

Concessions included:• Tax-free bubble around FIFA Unrestricted import-

export, exchange and conversion of all foreign currencies

• Suspension of any labour legislation that could restrict FIFA or its commercial partners

• Guarantees to indemnify FIFA against all claims

Benefits• Tourism Industry managed to earn $400 million

Figures highly exaggerated• 695,000 new jobs were created

Only 280,000 sustained

The biggest financial benefits, such as TV rights and sponsorships are pocketed by FIFA

Intangible Benefits

The successful world-cup left a positive image of South Africa across the world

Supposed to boost FDI and tourism

The South African government was compelled to act in a manner to fulfil

the financial greed of FIFA and its commercial partners.

PREDICTING THE SOCIAL AND ECONOMIC IMPACT OF THE WORLD CUP IN BRAZIL

BRAZIL MIGHT BE ABLE TO BUCK THE TREND Hosting consecutive events

Sports related investment is relatively low

Construction, Telecom and Transportation sectors poised for maximum investments

DIRECT AND INDIRECT IMPACTSCreation of jobs

Investment

Spending by visitors

The Domino Effect

Legacy

INFERENCES BASED ON INITIAL TRENDS

Brazil lost the World Cup, on the ground and off it as well

Low growth, Recession looming

Fall in productivity

World Cup hangover

HIT OR MISS

CONCLUSION