May 1st, 2014 by Associate
With the 2014 World Cup rapidly approaching, the United States qualifying(!), and two GBQ associates recently in Brazil, I thought it would be a good time to dive into some of the finances of hosting the Cup. As the countdown to first kick continues, Brazil has dominated the news cycle with angry citizens, unprepared stadiums, and overtaxed infrastructure.
For developing countries such as Brazil, hosting the World Cup is—in theory—an ideal way to show off progress and leave a legacy of a Cup well hosted. However, far too often the legacy of the Cup for host countries is massive debt, maintenance fees, and white elephants. Brazil is in the middle of a massive expansion of infrastructure (costing billions of dollars) to accommodate both the matches themselves and the large influx of foreign/domestic tourists. If the Confederations Cup (a pre-World Cup soccer tournament hosted in the same country as a practice run) is any indication, Brazil could be headed towards a disaster. Hundreds of thousands of protesters took to the streets—upset with increased bus fares, government corruption and a plethora of other problems. The issues have only deepened since most stadiums are significantly over budget and behind schedule, social issues have not improved, and the country is desperate to win a Cup on its own soil. Brazil is fully preparing for significant unrest–the Brazilian military and police force is currently training with French instructors on how to properly deal with civilian unrest (the police force is often called upon to wage mini wars in drug-controlled areas of the favelas (the large, poor slums that are commonplace in Brazil) and are therefore not entirely trained for crowd control).
One of the most polarizing issues within Brazil is the construction or rehabbing of stadiums to host the various matches. The estimated cost of these stadiums (if all went according to plan) was originally planned to be 5.3 billion Reals (~$2.25 billion); however, due to a lack of properly skilled workers and other delays, the cost has ballooned to over 8 billion Reals (~$3.41 billion), almost entirely derived from public funds. The structural quality of these stadiums is also in question. At the end of November, a crane collapsed on a section of the Sao Paulo stadium, killing two workers. This incident calls into question Brazil’s building practices. Another stadium issue is the displacement of people to commence construction–large numbers of people have been displaced, mostly from the favelas. The final issue centers on the stadiums themselves—how does Brazil prevent them from turning into white elephants? One plan involves using some of the stadiums to process prisoners; others hope to attract international events or local matches to cover their sizeable repair and maintenance costs.
The World Cup seems to be a net negative for developing countries. It is impossible to calculate if international reputation and clout increases with a successfully held Cup; however, it is easy for the citizens to see the costs in reduced services, displacement, and the gleaming monuments left to go to waste that now dot their various cities. Most of the actual profits from the Cup itself (TV rights, etc.) do not even go to the host nation—they are funneled to FIFA (a notoriously corrupt organization). Instead of wasting billions on fleeting (although highly entertaining) sporting events, developing countries should focus more on providing better services to their citizens and improving their overall infrastructure.
If you’re interested in further reading on the subject, I’ve linked some further articles:
(this article is a bit old, but the points are still valid/have been proven correct): http://www.americasquarterly.org/zimbalist