Economics of Sports: The World Cup.

Jun 30, 2014 | by Franck Cushner, CFP®

Meanwhile, in South America, millions of devoted soccer fans are making the pilgrimage to the Holy Grail of the world’s most beloved sport; The World Cup.  As matches officially kicked off in the recent days, the next four weeks will be particularly busy in Brazil, but will it help or hurt their economy?

As you may know, Brazil’s economy is growing, but whether the nation has the infrastructure to hold an event of this magnitude is a question we will shortly come to answer.  Brazil spent $22.47 billion in the recent years to ensure that the infrastructure is adequate enough to handle the tourists, venues, and everything that comes in-between.  According to an Ernst & Young report, the tournament will bring an extra $112.79 billion to the Brazilian economy.  Additionally, 3.63 million jobs were created between 2010 and 2014, stimulating a $143.39 billion dollar cash flow into the country, and $63.48 billion in income to the population.  The major industries benefiting from this are: civil construction, food and beverage, business services, electricity companies, gas services, broadcast, information services, and tourism & hospitality.

                  While this all looks great on paper, the residents of Brazil aren’t exactly thrilled with hosting the World Cup.  In recent national headlines, there have been riots and protests outside of the stadiums.  This doesn’t only cause a potential threat to the patrons of the stadiums, but it could possibly act as a deterrent to people who might want to travel to the games.  The reason the protests are happening is because many Brazilian residents believe that the billions of dollars that was used to build the stadiums should have been used to fund failing hospitals and education systems.  They believe that hosting the world cup will only bring temporary benefits to the country’s economy and infrastructure, posing no long term benefits.

                  In terms of the market, the IBOV (Brazil’s Index), is up 6.98% on the year, and the Brazilian government bond rates are up to 7%.  In addition, some individual stocks such as Gol, a major Brazilian airline, and Cielo, a payment company, have already seen positive growth.                     

 

 

 

 

 

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