Will the World Cup bring economic boom or bust?
13th of June, 2012
Table of content
1. Brazil in the spotlight4
2. Current economic situation4
3. Sporting events and the FIFA World Cup6
4. Challenges and efforts for the World Cup preparation in Brazil7
5. Consequences of the World Cup for Brazil10
5.1. Economic consequences10
5.2. Political consequences12
5.3. Social consequences12
6.1. SWOT Analysis13
7. Conclusion: Will the World Cup be a success story for Brazil?16
8.1. Literature sources19
8.2. Internet sources19
List of Illustrations
Illustration 1: Brazil GDP per capita5
Illustration 2: Soccer stadia in Brazil hosting the Soccer World Cup in 2014 8
Illustration 3: Official emblem FIFA World Cup 201410
Illustration 4: SWOT Analisys for the Soccer World Cup in Brazil13
List of abbreviations
CFBBrazilian Football Confederation
FDI Foreign firect investments
FIFA Fédération Internationale de Football Association
GDP Gross domestic product
1. Brazil in the spotlight
The next ten years are likely to become the decade of Brazil. Last year Brazilian’s economy was upgraded to place six in the World Economy League Table, meaning that the Latin American country took over UK’s economy. Furthermore, Brazil will host a variety of extraordinary events. (ZeitOnline, 2011). The kick off is in the year 2012 with the RIO+20, United Nations Conference on sustainable development, followed by the FIFA Confederations Cup in 2013. The next year the Soccer World Cup 2014 will take places preceding the Olympic Summer Games 2016 of Rio de Janeiro. To round out the Brazilian decade, the country runs for the World exposition in São Paulo in 2020 (German-Brazilian Chamber of Commerce, 2011). These major events contain possibilities and threats for Brazilian’s economy and its political reputation. In the following, a closer look will be taken at the Soccer World Cup 2014 as it is the first mega event hosted by Brazil in the coming years. The question will be cleared up if the World Cup will be boom or bust for Brazilian’s economy.
2. Current economic situation
Brazil one of the wealthiest countries – it is on place six- is far away from its former recession times. In the year 2010 Brazil had a nominal gross domestic product (GDP) of $2,088 billion US, which is equivalent to a 7.5% growth rate. Broken down, The GDP per capita was $10,943 US. The global slowdown hampered the economic growth rate in 2011. The GDP amounted to 2,200$ billion US, posting a slight gain of 2.7% while increasing the level of GDP per capita to $11,000 US (World Bank, 2012). Thanks to Dilma Rouseff (the new President of Brazil since 1.1.2011) and her predecessor, the country records stable GDP per capita growth rates, indicated in the graph below.
Illustration 1: Brazil GDP per capita
Note. Adapted from: http://www.tradingeconomics.com/brazil/gdp-per-capita-ppp
Stabilization policy has been conduced over years unleasing Foreign Direct Investments (FDI). High interet rates, FDIs and demand for Brazilian commodities triggered capital inflow so that the Real, the Brazilian currency, has been under appretiation pressure (German-Brasilien Chamber of Commerce, 2011). According to the Economist the Brazilian real is the most overvaluated currency in the world. The basis of this calculation is the Big-Mac Index and the average income. Paraphrasing, Brazil is the most expensivest country in the world (“The Big Mac index”, 2011)
Another factor pushing the Brazilian economy is the growing middle class. Although Brazil has to face a multitude of poor people the domestic market is flourishing. Almost 120 million of the population belong to the middle class, comprising families earning more than 400€. However, the benchmark is quite low, taking into account that Brazil still is classified...