The 11 billion World Cup

Ever since the 1992 Olympics in Barcelona, mega sporting events have been used by governments to create world-class infrastructure and ultra-modern cities, vying for global attention. The 2014 World Cup in Brazil however, has raised serious questions regarding this policy. At a cost of $11.3 billion, this is the most expensive World Cup ever. People have taken to the streets to express their displeasure with strikes and protests becoming a common occurrence across Brazil. The protestors feel that such spending from the government is inexcusable given the state of public services in the country.

Euler Hermes, the trade credit insurance business, predicts the World Cup and the Olympics (schedules for 2016 in Rio de Janeiro) will between them, add 0.2% to GDP growth in 2014. At the same time, this is expected to add 0.5% to inflation. The report argues these two cancel each other out and while job creation is always mentioned as a positive of hosting these events, the jobs themselves are temporary. While costs of hosting sporting events are always underestimated, in Brazil’s case they have simply spiralled out of control. For example, the National Stadium in Brasilia cost $900 million; three times the initial estimate.

While there are some infrastructural benefits, the main remnants of the tournament will be the expensive, abandoned stadia. For example, the stadium in Manaus – a city so deep into the Amazon that it can’t be reached by car – cost $270 million. The stadium will host just 4 matches; there are no local clubs capable of taking over the stadium once the tournament is finished.

The Brazilian stock index Bovespa is up 7% this year but still 9.76% below its high from 2012. It can be argued that the markets are simply recovering lost ground. The entertainment and hospitality industries have done well while airlines are also expected to do well over the next month. Once again, these effects are temporary.

One of the main sources of controversy regarding the tournament is the fact that it is FIFA that makes most of the money. The governing body is expecting $4.5 billion in revenue from the tournament. The sources of this income are TV rights and sponsorship. TV rights for the tournament have so far fetched $1.73 billion while top-tier sponsors Adidas, Coca-Cola, Emirates, Hyundai, Sony and Visa pay a combined fee of $177.1 million annually. 

Organising the tournament is costing FIFA $2 billion, with the bulk of the amount being shared by prize money and the expenses of the organising committee. The winning national football association will be awarded $35 million and the runner-up will pocket $25 million. Each of the 32 qualifiers was given $1.2 million to help prepare for the tournament with the total tournament pot being worth $576 million. 

The players themselves are worth big money. According to trading site Transfermarkt, the total value of the 786 footballers is $9.69 billion. The most expensive team is Spain with a total value of $916 million with Germany coming in second ($828 million). The highest paid players are Portugal forward Cristiano Ronaldo and Argentina striker Lionel Messi who make $80 million and $64.7 million per annum respectively.

While the figures may not prove pretty reading for Brazilians, the government hopes that a successfully hosted World Cup will surprise those who doubt Brazilian efficiency. It is hoped the economy can gain some momentum and perhaps, with one eye on the upcoming elections, President Dilma Rousseff thinks that a feel good factor will help her secure another term. While the cost-benefit analysis will carry on once the tournament is over, for the next month, over half the world will be glued to their TV sets enjoying a truly special event.

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