Brazil, Fifa are winners

The dust has settled. The last football fan has left the Estadio de Maracana in Rio de Janiero were the epic struggle won by Germany against Argentina was played out. Spectators in the 11 other host cities have long gone home but memories of the eliminations, round of 16, quarterfinals and semifinals remain fresh in their collective memories.

The German squad arrived in Berlin and was promptly paraded before a wildly cheering crowd in a 1.3-km motorcade that took all of two and a half hours to complete. Lionel Messi and company got a hero’s welcome even if Argentina finished second to the Germans. Protesters are back in the streets and for Brazil’s leaders it’s time once again to face the restive population.

Brazil’s leaders had hoped that its national squad would win its sixth world title, the first on home soil. After all, even if it had spent about US$11 billion to host the championship amidst all the other problems plaguing the country, the title would help justify the expense and pacify the opposition. Despite the ignominy of losing 1-7 to Germany in the semifinals made more painful by going down to the Netherlands in the battle for third place, Brazil’s leaders had physical evidence to show for the investment. World Cup defenders had also cited the event’s tremendous multiplier effects.

Hosting events of the magnitude of the World Cup involving 32 of the world’s most powerful countries, certainly has both monetary and non-monetary (psychic, if you will) benefits. And all these benefits were uppermost in the minds of Brazil’s leaders long before the referees blew their respective whistles to start the first matches in the 12 venues.

Candidate-host cities do, as a matter of practice, detailed cost-benefit studies before launching bids for international events like the World Cup. There is therefore nothing magical about such studies: it would be foolhardy to commit to huge public expenditures without estimates of returns.

The 2014 FIFA World Cup was definitely not an exception. A document entitled “Sustainable Brazil – Social and Economic Impacts of the 2014 World Cup” authored by Ernst & Young Terco (E&YT) discusses how Brazil is to benefit from hosting the world football championship. In introducing itself, E& YT states, “it is a global leader in assurance, tax, transaction and advisory services. Worldwide, (its) 144,000 people are united by (its) shared values and an unwavering commitment to quality.”

In Brazil, E&YT asserts it is the most complete company for advisory and assurance services boasting (of) 3,500 professionals (who) support and serve over 3,400 large-, medium- and small-sized companies.

The E&YT reports starts with the statement that the World Cup’s profile has changed significantly since the 1950 World Cup (which was the first to be hosted by Brazil). The World Cup will bring, according to E&YT, impacts and benefits – whether temporary or long-lasting, whether direct or indirect – to different economic and social segments. On the other hand, it also presents several risks requiring effective management processes in the public and private sectors for the full flow of benefits to society.

The E&YT study emphasizes that the tournament is expected to have brought an additional Brazilian Real (R$) 112.79B or, at R$ 2.2 = US$1, about US$50 billion (P2.250 trillion) to the Brazilian economy with indirect and induced effects being produced thereafter. In total, an additional R$ 142.39 billion (US$64.7 billion), (should have flowed into Brazil) from 2010 to 2014, generating 3.63 million jobs per year and R$63.48 billion (US$ 29 billion) of income for the population, which inevitably (impacted) the domestic consumer market.

The expected level of production should result in an additional tax collection of R$18.13 billion (US$8.24 billion) by the local, state and federal governments. The World Cup’s direct impact on the Brazilian Gross Domestic Product (GDP) is estimated at R$64.5 billion (US$29.3 billion) for the period 2010-2014.

As the World Cup is a one-time event, most of its systematic impacts will not be permanent. In fact, once the investments have been concluded and the World Cup has taken place, the positive impacts will remain based on the stakeholders’ ability to benefit from the event’s opportunities and legacies. E&YT stresses evaluation of economic impact is limited to the period 2010-2014.

There will certainly be winners in this mega magnum opus. E&YT conclude that the sectors mostly benefiting from the World Cup are construction, food and beverage, business services, utilities, (electricity, gas, water, sanitation and urban cleaning) and information services. Together, all these areas will increase output by R$50.18 billion (US$23 billion). Civil construction would have generated an additional R$8.14 billion (US$3.7 billion) in the period 2010-2014.

Thus, E&YT qualifies that the job creation estimated primarily refers to temporary jobs only. As far as compensation is concerned, the estimated 3.63 million jobs per year correspond to 3.63 million positions to be held for one year.

Other economic segments that will take advantage of the World Cup are business services and real estate service and rental, with the former generating an additional R$6.5 billion (US$3 billion) and the latter an additional R$4.4 billion (US$2 billion) over the period.

These dizzying array of figures show, the 2014 FIFA World Cup pump-primed the flagging Brazilian economy. Brazil lost the World Cup but was, overall, the winner. FIFA too is crying its way to the bank with about US$4.5 billion in revenue, while the 32 national football federations bring home US$400 million. Not bad for putting together a spectacle that involves 22 men in shorts chasing one ball for 90 to 120 minutes.