Will the World Cup Boost Brazil’s Economy?

Every four years, the world’s football association or FIFA, as the Switzerland-based governing body is more commonly known, converges for what is essentially a bonanza of nations playing for the gold trophy awarded to the team that survives a month of play. Soccer, as the U.S. fans refer to the sport, is a global game, and what some economists also say could be an economic indicator for a country as well.

2014 will see a BRIC nation – and host country – go up against the frontier nations and the frontier go head to head with the developed ones. Brazil versus Cameroon? It’s already happened. Italy ousted by Uruguay? All done. Giants have fallen and faltered , and new ones are emerging.  And much can be said about the respective economies, too.

Jim O’Neill, former Chief Economist of global investment house Goldman Sachs, is a well-known soccer fan. In the spirit of the 2014 tournament, Goldman once again has published its outlook on the World Cup and Economics, a popular report O’Neill led during his tenure at the firm.

O’Neill now contributes to Bloomberg View, the digital opinion pages of Bloomberg News. He has carefully weighed in on the action in Brazil this year. Pointing out that a MINT nation (Nigeria) is in competition, Germany is likely to advance because their play “is typically as efficient as their economy in avoiding silly errors.”

Spectators will agree that to date, the 2014 tournament has been a high-scoring one. O’Neill describes the scenario as such for Bloomberg View:

“The World Cup so far has delivered lots of goals and no outright favorite to win — a bit like financial markets in recent weeks. With an average of 2.9 goals a game, 2014 has given fans the fastest tally since the 3.0 pace achieved in the 1970 tournament in Mexico. The lack of clarity about a potential victor even after most teams have played twice, though, pretty much parallels current investor uncertainty about the state of the global economy and the world’s financial asset classes”.

After The Party

 Host nation Brazil is a popular topic of discussion these days. World Cup aside, presidential elections are scheduled for 2015, and the next Summer Olympics in 2016 are headed to Brazil. Many industry analysts are saying the World Cup will be an indicator on how the emerging nation manages infrastructure and billions of dollars in spending. A reported $11 billion + in World Cup spending was planned for stadiums, inter-city transportation and upgrades.  According to global ratings agency Moody’s, this is a positive for infrastructure providers. But it is not the biggest piece of the pie. With all the spending so far, “much of the impact has already been felt and it is only about 0.7 percent of overall planned investment in Brazil in 2010-14.”

The tournaments will no question continue to draw hundreds of thousands of visitors to Brazil, boost tourism revenue and help stimulate the struggling economy, at least temporarily. But ultimately, says Moody’s, in its World Cup 2014 report

“… the activity associated with the World Cup pales before Brazil’s $2.2 trillion economy, its normal levels of investment spending and the annual revenues of the companies that will provide food, drink, transportation, lodging and other services to football fans.”

Ultimately, the agency views the 2014 World Cup as neutral for Brazil’s sovereign credit quality. The Brazilian government, according to Moody’s, expects the World Cup to boost GDP by just 0.4 percent from 2010-19, with much of the macroeconomic impact already having been felt through infrastructure spending. Overall, “the impact will be more meaningful at the local level.”

Commenting on the host nations’ chances this World Cup, O’Neill concluded in a recent column:

 

“As for the economy, it isn’t true that I only added B to BRICs because of my football obsession, as some wags have suggested. Let’s just say the hosts will take whatever cheer the World Cup offers to boost the fortunes of the economy, and what better tonic could there be than Brazil winning on its own soil against archrivals Argentina?”

 Read More:

Brazil’s Central Bank President on the Country’s Road Ahead

Dawn Kissi is an international cross-platform journalist covering the business, finance and economies of the world's emerging markets. She reports and produces content on sovereign and geopolitical risk, central banks, global exchanges and various sectors within financial markets. Her journalism career began in the New York newsroom of ABC News. She has since reported on a range of topics from a number of countries. She is multi-lingual and a graduate of Columbia University's Graduate School of Journalism.

Additional Recent Articles in News