Brazilian World Cup – déjà vu New Zealand 2011

Brazilian doubts about the financial spinoffs from the FIFA World Cup due to kick off later this week sound hauntingly familiar to those heard in New Zealand before the 2011 Rugby World Cup.

New research from the Grant Thornton International Business Report (IBR) has found that Brazilian business enthusiasm for hosting the tournament has plummeted over the past two years. The proportion of Brazilian business leaders who believe hosting the World Cup would translate into faster economic growth has fallen from 80% in Q1-2012 to just 33% by Q1-2014.

Alec Flood, Partner, Audit at Grant Thornton New Zealand, said similarly, the early hype surrounding the Rugby World Cup in this country started to flatten the closer we got to the first kick off.

“While there were definitely winners in the wash up of the Rugby World Cup, there were just as many, if not more, who were disappointed with the outcome.

“There were many businesses who invested heavily in anticipation of the profit they would reap from the cup, but that profit never eventuated,” he said.

In Brazil, few business leaders are predicting increased investment (just 11%, compared with 23% in 2012) or increased profits (19%) as a result of Brazil hosting the competition. Fifty two percent of businesses are expecting the tourism sector to see the biggest pick-up in activity.

“Business enthusiasm for the World Cup has certainly ebbed away as the economic situation in Brazil has worsened over the past 24 months. Initially there was much hope in the business community that the infrastructure investments required to get the country ready to receive 600,000 visitors this summer - not to mention those coming for the Olympic Games in 2016 - would boost the long-term growth prospects of the economy.

“This should have been an opportunity to place Brazil in the international ‘shop window’, but instead international media attention has been focused on delays in stadia construction and public protests against both the government and FIFA."

More than two in five business leaders expect infrastructure investments - particularly those in the transport sector - to be the most enduring legacy of the games (42%), with a further quarter expecting a greater influx of tourists (26%). However, almost a third believe stadium construction in their city has disrupted daily life and just 40% believe the stadium will be well used once the tournament is over.

“One aspect that the survey did not touch on was the loss in business productivity in Brazil during the World Cup. When you think back to the Rugby World Cup in New Zealand, it’s likely that productivity dropped during this time. I’m not just talking about those people who took sick days on game day, but also the amount of time wasted on emails and phone calls, discussing every game over several weeks. It all adds up but has probably never been calculated.

“However, the one good thing in Brazil’s favour is that this is turning out to be a great dress rehearsal for the upcoming Olympics in 2016. There is now an increased awareness in government and in the private sector of the shortfall infrastructure and what needs to be done to get the county ready for these games, and for sustainable growth to become a reality.

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