Brazil’s Cup of Chaos?

Written by Dr. Sumit Sarkar on June 11, 2014

FIFA World Cup 2014 is only hours away. We all are ready to embrace the showpiece event of the most famous global sport in its spiritual Home – Brazil. But how does this Home feel to a common Brazilian? Is it really worth to have such an expensive event organized in a third world country? Sumit Sarkar looks at the other side of the coin at Goalden Times.

Economics of FIFA World Cup

Brazil was awarded the organization of FIFA World Cup 2014 seven years ago, in 2007. At that time, the Brazilian economy was booming, and the leadership of the country wanted to use the FIFA World Cup to showcase Brazil’s arrival as a major economic powerhouse.

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When a country hosts a major sporting event like the FIFA World Cup or the Olympic Games, the country invests heavily in development of infrastructure. This sort of infrastructure development creates jobs for hundreds of thousands and boosts demand for consumer goods, which in turn, results in increased production and further job creation. The country gets new infrastructure, which could be used in future by the citizens, and at the same time this infrastructure could be productively used to boost businesses.

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While almost the entire cost of hosting the World Cup is borne by the host country, FIFA makes a lot of money from the sponsorship deals. For South Africa 2010, FIFA spent an insignificant amount of $482 million and made a profit of $1.9 billion from the tournament. The burden on the host nations would have been less if FIFA shared the profit with the host nations.

The Brazilian Economy and the World Cup

In 2007 when Brazil won the rights to host the 2014 World Cup, Brazilians were euphoric. To them it was the “cup coming home”. At that time, the Brazilian GDP was growing at the rate of 6.1%, and they thought that the growth rate will receive a major impetus from the infrastructure development for World Cup.

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The recession of 2008-9 changed the scene. In 2009, the GDP growth rate of Brazil turned negative, unemployment rate increased by 1.2 per cent in 2009 and inflation rate reduced by 0.8 per cent. Wages too took a dip, resulting in marginally reduced purchasing power of the common man. This is the time when ripples of discontent over hosting the World Cup started surfacing.

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Brazil is the seventh largest economy in the world and the largest in Latin America. The Services sector is the most important but the economy is much diversified and hence robust. Figure 1 shows the contribution of different sectors in the country’s GDP.

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Figure 1

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Brazilian economy was not in the best of its health over the last five years, but the figures do not indicate any crisis. Brazil is not Greece! The graph given below (Figure 2) summarizes the state of Brazil’s economy since 2007. 2012 was a particularly bad year, but the economy somewhat recovered in 2013. In the first quarter of 2014, Brazil’s GDP grew 0.7 per cent. Between June 2013 and May 2014, unemployment rate reduced by 0.9 per cent, and inflation rate reduced by 0.2 per cent.

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Figure 2

Brazil’s economy may not be booming, but things would have been much worse in the absence of the World Cup. The construction and renovation of stadia, airports and urban transport systems created jobs that would have been non-existent, had the World Cup not happened. According to Brazil’s Ministry of Tourism, 7.2 million foreign tourists are expected in Brazil including 600,000 football fans during the World Cup. The foreign travellers, along with Brazilians who will be travelling across the country to watch matches, will generate 6.7 billion Real (close to $3 billion) revenue for the tourism-related service industry and the overall impact of World Cup related investments will be 20.7 billion Real (around $9.25 billion).

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But it looks like Brazil missed an opportunity to develop its urban infrastructure. They planned an investment of $11.7 billion in infrastructure development, including renovation and building of stadia. According to the Office of the Comptroller General, only about 60% of that was spent. Just 36 of 93 planned projects were completed. Major projects like bullet train between Rio and Sao Paulo, monorail in Manaus and Bus Rapid Transit System in Belo Horizonte have been called off. Monorail project of Sao Paulo and the tram network of Salvador have been downsized. Even airports in four host cities, Belo Horizonte, Cuiabá, Fortaleza and Rio de Janeiro, will be completed after the World Cup is over. All these call-offs and delays are due to somewhat poor planning and mostly due to red-tape and corruption. But that is how Brazil functions. That is how Latin America functions. That is how most of the developing nations function.

Brazil’s Preparedness and the Politics of the World Cup

So, should a developing nation not get to host major sporting events? Luis Fernandes, Brazilian deputy sports minister is quite curt on the issue: “It’s not a good plan to try to limit the right to host major sporting events in the world to a small group of rich countries.”

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Far too many reports on Brazil’s apparent lack of preparedness to host the event, and those of street protests flooded the Western media. The Europeans are unhappy that the FIFA World Cup of 2014 did not return to Europe. Earlier, Europe hosted two consecutive World Cups in 1954 and 1958, and then the FIFA World Cup returned to the continent every eight years. So, it is no wonder that the Europeans think it is their birth right to host every alternate World Cup, and, therefore, 2014 was their turn. But FIFA changed its continental rotation policy in 2007. As per the new host selection rule of FIFA, a member country cannot bid for the World Cup if another member country belonging to the same confederation hosted any of the previous two World Cups. 2018 it is returning to the continent, but then again Russia is not really “Europe”. But Russia hosting in 2018 means the World Cup will not return to any UEFA member country before 2030. That is too long a wait, unless FIFA is forced to change its host selection rule yet again. If Brazil 2014 could be shown as a failure, and if Qatar could be shown as caught in a medieval time-wrap, FIFA might confess its ‘mistake’ and restart the rotation policy from 2026. Indeed Qatar has its own set of footballing issues like atmospheric temperature in June-July, but the Western media is overtly emphasizing the issues of human rights and working conditions of laborers. The cities like Doha, Riyadh, Bahrain, Jeddah, Kuwait City, Dubai and Abu Dhabi were built by cheap bonded laborers from Bangladesh, India and Nepal. Western Media had nothing to say about that as in most cases the employers were American and European construction companies.

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Now Colombia is a major contender for hosting FIFA World Cup of 2026. If Brazil 2014 is a success, then Colombia’s bid becomes stronger. So, to bring back the World Cup to Europe in 2026, Brazil 2014 must be a failure! The overdose of negative media reports regarding Brazil’s preparedness is a reflection of this European agenda. Europe badly needs a few World Cups and Olympics to recharge the economy of the European Union. Of course there is some truth in the reports, but the disproportionate negativity is to ensure that the World Cup returns to Western Europe once in every eight years.

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Brazil of course has its own set of problems like bureaucracy, low productivity and corruption. Everyone knew about those problems when Brazil was awarded the right to host. Brazilian organizers also took a few wrong decisions. FIFA required them to have eight host cities, but being ambitious they wanted to spread the World Cup across 12 cities, including Manaus in the middle of the Amazon rain forests. The intention was good. The idea was to spread the benefits of hosting across the country. But it resulted in major cost escalation.

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How unprepared is Brazil now? It is reported in the Western media that airports are not ready. Certain expansion plans got shelved in Belo Horizonte, Cuiabá, Fortaleza and Rio de Janeiro. But that does not mean that the airports are not ready. Flooding in one of the passenger terminals at the Manaus airport quickly made its way to the headlines. Now, that is normal if the airport is located in the middle of the rain forests. São Paulo’s new Guarulhos International Airport, which has the capacity to serve 12 million passengers per year, was -inaugurated by President Rousseff on 11th May. This is a state-of-the-art airport, but like any new airport had some teething problemS. Apparently some passengers complained about the airport’s baggage handling system, and some airliners delaying transferring to the new airport. This became big news in the Western media!

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FIFA set a deadline of December 2013 for Brazil to complete construction of the stadia. Six of the 12 host arenas missed the deadline. The deadline was extended, but until last month Itaquerao Stadium (or Arena Corinthians) in Sao Paulo, Curitiba’s renovated Arena da Baixada, and the newly built Arena Pantanal in Cuiaba were running the risk of not being complete on time. Odebrecht, the construction company building the Itaquerao Stadium of Sao Paulo admitted that they won’t be able to install a glass cover that was part of the roofing structure of the stadium and could have protected most of the spectators from rain. This also became a big issue in the media. How many stadia in England are completely covered? It was reported that though the Itaquerao Stadium was inaugurated by President Rousseff on 10th May, much of cabling work and installation of broadcasting facility is yet to be in place.

On 18th May Corinthians hosted Figueirense at Itaquerao for a Serie A match up. 40,000 spectators attended the match. There were issues like long queues to enter the stadium due to presence of construction equipment around the stadium. There are media reports that there was no internet connection inside the stadium. These are finer details that need to be ironed out before 12th June, but not something for which hell freezes over like it is being projected in the Western media. Yes, it may go down to the wire, but it will be ready and on 12th June when Brazil plays against Croatia in the tournament opener, there indeed will be an atmosphere of carnival.

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Earlier this year, serious doubts were cast on whether the Arena da Baixada in Curitiba will be ready for the World Cup. As a test event, Atletico Paranaense hosted Corinthians for a friendly on 14th May. The arena passed the test, but again certain issues were reported. There were complaints about the press box and toilets. Some seats were not yet installed. The stadium was to be handed over to FIFA after the seats were installed. The first match in Arena da Baixada is scheduled on 16th June between Iran and Nigeria. Here too things will go down to the wire.

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The newly built Arena Pantanal in Cuiaba is the third stadium that ran the risk of not being complete. But this arena is ready now, and there have been no complaints so far.. On 18th May Santos played against Atletico Mineiro in a Campeonato Brasileiro Serie A match up. The event went well and the stadium was handed over to FIFA on 21st May.

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Western media reports that Brazil is paying the price of the delay in lives. Eight construction workers died in accidents at different stadium sites. Though there can be no excuses for this, such accidents are common place despite all safety measures. In South Africa, too, two construction workers died. Such accidents happen not only in Brazil and South Africa, but also in Europe and North America. In 2004, while the Wembley Stadium was being renovated, one construction worker died and another got injured. In October 2013, one construction worker was killed at the site of the San Francisco 49er’s new stadium at Santa Clara.

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As a nation, and as a people, Brazil and Brazilians have been subjected to malice by the Western media. It is the same kind of malice that the Western media brought up against Iran, China, or even Malaysia when the unfortunate country lost one of its passenger planes in the middle of a flight. It is the same racist attitude that the spectators rub off on African and Latin American players from the stands of different stadia in Spain, Italy, England and Germany.

Protests on the Streets and Brazilian Politics

To understand the dynamics of the conflicts on the streets, we need to understand Brazilian politics. When the military regime took over at Brazil, Joao Goulart of the Brazilian Labor Party was holding office. After the New Republic was formed in 1985, the Worker’s Party came to power for the first time in 2002 when Lula da Silva became the president. Brazil prospered under the leadership of Lula da Silva, and he was holding office in 2007 when Brazil won the hosting rights. Dilma Rousseff, the first woman president of Brazil, assumed office in January 2011 after the Worker’s Party won the elections for the third consecutive term in 2010. She will seek re-election in October this year, and if the World Cup is a grand success, she will surely return to office. So, there is reason for the opposition to spoil the World Cup carnival.

But, the protests on the streets are not stage-managed . The people, at first, came down on the streets with their own agenda. For example, the first protests that took place sporadically in August-September of 2012 at Natal and in March 2013 at Porto Alegre were known as Revolta do Busão. The people were simply protesting against increased bus fares. Just before the Confederations Cup kicked off, on 22nd May 2013 the bus fare was raised from 2.7 Real to 3 Real in Goiânia, resulting in public anger. Similarly, in Sao Paulo the demonstrations started when the metro fare was raised from 3 Real to 3.2 Real on 2nd June 2013. Let us understand that fares in public transport systems remained unchanged since 2011. So, how come a 9 or 10 per cent increase in fares result in such unrest during a period when the general inflation rate was 5-6 per cent? That too, while the Federal Government exempted the public transport systems from PIS and COFINS taxes. Some sections of the Brazilian political class, with or without help from foreign agents, managed to instigate the public and channel their anger towards protests against the World Cup. The fact that the Confederations Cup was on at that time made it easier to direct the public anger towards the World Cup, which culminated in formation of the movement called Nao vai Ter Copa (There Won’t Be a Cup).

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The fact that a 10 per cent raise in bus fare could spark such large scale unrest indicates that deep discontent runs through the heart of the Brazilian society. The distribution of wealth in Brazil is one of the worst in the world. The Gini Coefficient, which is a measure of income inequality, was always very high in Brazil. The higher the Gini Coefficient is, more unequal the income distribution is. We can get a comparative idea from the fact that the Gini Coefficient in Brazil is around 0.55, against 0.34 in India. As a matter of fact, the income distribution got marginally better during the period when Worker’s Party held the Presidential Office. Gini Coefficient in Brazil came down from 0.6 in 2001 to 0.547 in 2010 (Source: UNDP; https://data.undp.org/dataset/Income-Gini-coefficient/36ku-rvrj). The fact that inflation rate was above 6.5 per cent, and unemployment rate was close to 6 per cent (Source: http://www.tradingeconomics.com/brazil), during June-July of 2013 added fuel to the fire.

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The Nao vai Ter Copa movement almost fizzled out during the latter part of 2013. But the signs of unrest are coming back on the streets since this May. On the third week of May 2014, Brazil witnessed various protest demonstrations in different cities. There was a strike called by the trade unions of industrial workers, teachers demonstrated demanding higher wages, museum employees and geologists demonstrated with their own set of demands and so did the bus drivers. A closer look at Figure 3 and Figure 4 will reveal what drives these demonstrations.

Figure 3

Figure 4

During June-July of 2013 the inflation rate and the unemployment rates were high. People took to the streets. As the inflation rate and unemployment rate reduced during the last quarter of 2013, the protests evaporated from the streets. Again the rates are rising since February 2014 and people are taking to the streets. The pattern is clear.

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Here again, let us note the role played by Western media. Though the different protests of May 2014 had different agendas, the media reported those as coordinated anti-World Cup protests across 12 host cities. Of course a section of the Brazilian political class wanted the protests to be portrayed in that manner only. The media coverage helps them in getting the extra edge over Ms. Rousseff during the October 2014 elections. So, banners claiming “Na Copa vai ter luta” (The Cup will have protest) returned to the streets of Rio, Sao Paulo, Recife and Belo Horizonte. The argument that $15 billion spent on preparations for the World Cup could have been used to better the lives of the people, have made a comeback. This argument found air beneath its wings during the Confederations Cup. It was argued that at the cost of renovating the Maracanã, 200 new schools could have been set up, or the lives of the residents of Favelas could have been changed. The argument is flawed. First, of the $15 billion, about $7 billion was public money and the rest is private sector investment. Even the government looks for a return on investment. The World Cup is expected to result in a 0.5 per cent increase in GDP growth rate. Building houses for the residents of the Favelas won’t give any return to the government. Schools are of course important investment in the social sector, but will 200 extra schools find students? Like in India, the Brazilian children who don’t go to school work as child labourers. Even if the schools are free schools, the children who need to earn won’t come to school. Their parents need to be paid doles to ensure the students come to school, and the parents will spend the dole on alcohol and drugs.

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The macroeconomic indicators of Brazil do not indicate any crisis. The economy slowed down since 2009, and more so since 2011, but the absence of World Cup would have made matters worse. As a matter of fact the inflation rate and unemployment rate soared during the Confederations Cup and is showing similar trend again bringing different sections of the Brazilian society to the streets. The over cautious government is deploying 150,000 troops and police to secure safety of the visitors and spectators. This in turn is resulting in harassment, and at times violation of human rights, of the underprivileged sections, particularly the residents of Favelas in Rio and the homeless of Sao Paulo. Such harassment by the security forces angers the public more. The poorer section of this football-mad nation is also unhappy that the ticket prices are unaffordable to them. The fact that they won’t be part of the carnival inside the stadia also angered them.

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Neither the protests, nor the alleged unpreparedness of the host nation is preventing the fans from across the globe from booking their flight tickets to Brazil. FIFA received a total 3.5 million ticket requests and sold 1.5 million tickets. Only about 160,000 tickets are left to be sold in the final phase of ticket sales. Even the alligators or torrential rain of Manaus do not seem to be bothering the fans as the USA-Portugal match scheduled there is already sold out.

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The situation in Brazil is nicely summed up by former Seleção captain, Carlos Alberto. He told The Guardian: “There exists a sort of anti-World Cup sentiment and because of this I think people aren’t decorating the streets and wearing the national team shirts as in the past. But closer to the tournament I think people will come around and they’ll start to get excited. Many Brazilians are currently against the Cup, but when the event actually starts all the happiness that comes with Brazilian football will reveal itself and the mood will change.” We are also optimistic like Carlos Alberto.

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Data Source: 

 http://databank.worldbank.org/data
 http://www.tradingeconomics.com/brazil

About Dr. Sumit Sarkar

Dr. Sumit Sarkar is a football lover and an ardent follower of La Liga. An economist by profession, Sumit has a keen interest in economics of football clubs and leagues. You may follow him on Twitter @SumitS_

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