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Moody’s Says Brazil’s World Cup Bump Will Be ‘Short Lived’

Mar 31, 2014 3:16 pm

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The bump may be smaller than Brazil would like, but it will be a good test run for the Olympics in two years.

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A general view of the Arena de Sao Paulo Stadium in Sao Paulo. Paulo Whitaker / Reuters


Brazil will get a “short-lived” benefit from hosting soccer’s World Cup this year, Moody’s Investors Service said today in a report.

South America’s largest country is racing to finish several delayed infrastructure projects for the June 12 start of the monthlong event where 600,000 foreign tourists and 3 million domestic travelers are expected to take in 64 games in 12 cities.

“The tournament will capture the world’s attention, but an estimated 25.2 billion reais ($11.1 billion) economic boost pales before Brazil’s $2.2 trillion economy, normal levels of investment spending and annual revenues of companies that will provide food, drink, transport, lodging and services to football fans,” credit rating company Moody’s said. The tournament will offer a “short-lived” boost to the food and beverage, lodging, TV broadcasting and car rental sectors, it said.

Brazil, which is spending 8 billion reais on stadiums, is struggling to meet deadlines set by soccer governing body FIFA. A worker at the Sao Paulo stadium that will host the opening game between Brazil and Croatia was killed in an accident two days ago while installing temporary seats. His death was the seventh at stadium building sites. Three arenas are unfinished, while work to install temporary facilities required by FIFA is still going on at many others. Several airports remain construction sites, too, and many promised transport projects have been scrapped or delayed until after the tournament.

Social Unrest

Hosting the World Cup carries risks from potential social unrest, according to Moody’s. Brazil’s biggest demonstrations in a generation flared during last year’s Confederations Cup, an eight-team warm-up for the main event. Protesters used the opportunity to complain about a range of problems and some said the money Brazil is spending on the World Cup would be better off going toward improving health and education standards.

“We see little impact on Brazil considering the limited duration of the World Cup and the size of the country’s economy,” Moody’s said. “While the event offers a potential reputational benefit, it could be marred by a reprise of the social unrest seen last June or if needed infrastructure was not ready.”

Brazil needs to be prepared for increased scrutiny that will come from hosting the world’s most-watched sports event, said Xiaoyan Zhao, a director for global research and consulting at GFK, a company that ranks nations as brands using factors such as governance, business practice, tourism and culture and heritage.

‘Media Scrutiny’

“This is a very important occasion for the country to showcase its real achievement but also it does run some risks of having closer media scrutiny of the dark areas that otherwise might not be exposed,” she said in a phone interview. “So it’s a double-edged sword for sure.”

Moody’s said local construction companies have been among the biggest beneficiaries. Yet the country could also suffer as “disruptions associated with traffic, crowding and lost work days will take a toll on business.”

To contact the reporter on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net. To contact the editors responsible for this story: Christopher Elser at celser@bloomberg.net Peter-Joseph Hegarty

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