Did the World Cup Boost Brazil’s Economy?

Six years ago, when Brazil successfully bid for the 2014 FIFA World Cup and 2016 Summer Olympics, the country was in an economic boom driven by international commodity demands. The country’s GDP growth rate reached 7.5% in 2010, and overtook the UK to become world’s 6th largest economy in 2011. The Brazilian government expected to receive tourism revenues, increase consumption, add jobs and develop infrastructure by hosting these mega-events.

Meanwhile, mistrust of Brazil’s preparation for the event never stopped. Although the 2014 World Cup turned out to be a ‘big success’, last year Brazil’s economic performance was disappointing. The Brazilian Central Bank said that the annual GDP growth rate was 0.15% based on economists’ prediction.

The World Cup attracted more than 1 million international tourists during the tournament, and about 3 million Brazilians traveled around the country. However, it is hard to reach the conclusion that Brazil’s tourism industry benefited from the event. The number of foreign tourists was stable after the World Cup, and spending of foreign visitors even decreased from August through November, compared to earlier years.

Brazil has many world top attractions, yet the high costs, underdeveloped infrastructure, poor public transit system, language barriers, and violent crimes scare tourists off. The Brazilian Government has spent 15 billion USD for the World Cup, and will spend more on the 2016 Rio Olympics. In the short term, the revenues certainly won’t cover the costs.

Even including the long-term positive impacts, the mega-events could hardly fuel the economy. Most money spent on the World Cup came from government, while the government spending has long been high and limited Brazil’s ability to use fiscal and monetary policy to stimulate economy when the global economy fluctuates again. It was fragile to economic shocks. What happened in 2014 just verified that Brazil has become too dependent on commodities and did not prepare for another economic recession. When the need for commodities of China and EU decreased, Brazil’s growth dropped and Brazilian currency depreciated.

Weiran Zhang
MPP ’15


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