fifa world cup 2014: social impacts and policy strategies

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Bachelor in International Economics, Management and Finance Università Commerciale Luigi Bocconi FIFA World Cup 2014 in Brazil: Social Impacts and Policy Strategies Bachelor Thesis by Flavio Kleijssen Student 1492032 Tutor: Professor Valentina Mele ACADEMIC YEAR 2013-2014

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The main aim of this study is to analyze ex-ante the likely socio- economic impact of the 2014 FIFA World Cup that will take place in Brazil. The recent trends of highly competitive bids to be designated host country of a sport mega-event show us the bidders believe such events to generate positive impacts. In this paper, we analyze through a descriptive approach the main aspects of potential economic and social effects through the organization of the World Cup, while contrasting it with the major cost and risks Brazil is bearing. Our conclusions show that organizing a major sporting event is a unique opportunity for economic and social development, can accelerate infrastructure improvement and it is a major factor for gaining in international reputation, and, therefore, increasing in the long run a country’s soft power. However, in the case of Brazil, the high cost, widespread popular discontent, safety issues, lack of planning and coordination may have an important negative impact, which is likely to offset the benefits. It has been said that Brazil is the country of the future, and always will be. The 2014 World Cup, and 2016 Olympic Games will give a strong indication whether this still holds true.

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Page 1: FIFA World Cup 2014: Social Impacts and Policy Strategies

Bachelor in International Economics, Management and Finance Università Commerciale Luigi Bocconi

FIFA World Cup 2014 in Brazil: Social Impacts and Policy Strategies

Bachelor Thesis by Flavio Kleijssen Student 1492032

Tutor: Professor Valentina Mele

ACADEMIC YEAR 2013-2014

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Acknowledgments

I would never have been able to finish my thesis without the guidance of my advisor Professor, help from friends, and support from my family.

Therefore, I would like to express my deepest appreciation to those who provided me the help to finalize this thesis.

I wish to express my sincere thanks to my supervisor Professor Valentina Mele, for her excellent guidance, patience, and providing me with an excellent atmosphere for doing my research. Indeed her contribution with stimulating suggestions and encouragement helped me tremendously to complete this thesis. I would like to take this opportunity to express my deepest thanks to my parents Jan and Stefania, which supported me both financially and emotionally throughout my degree, and have always believed in me. I wish to thank my two younger brothers, Claudio and Valerio for their incredible love, support and care, as the rest of my family. I am deeply grateful to my friends who have always encouraged me and helped me through the tough moments.

A special gratitude I give Anna, her support, encouragement, quiet patience and unwavering love have been essential to complete my degree.

Finally, I would like to leave the remaining space in memory of Roberta (1964-2013), an incredible person and example.

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Table of Content

Abstract  ...............................................................................................................................................  6  

1.  Introduction  ..................................................................................................................................  6  

2.  Economic  Impact  .........................................................................................................................  8  3.  Social  Impact  .............................................................................................................................  13  

4.  Sustainability  ............................................................................................................................  18  5.  Risks  and  Constraints  .............................................................................................................  21  

6.  Long  Term  Opportunities  .....................................................................................................  24  

7.  Conclusion  ..................................................................................................................................  27  8.  Bibliography  ..............................................................................................................................  28  

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Abstract

The main aim of this study is to analyze ex-ante the likely socio-

economic impact of the 2014 FIFA World Cup that will take place in Brazil.

The recent trends of highly competitive bids to be designated host country

of a sport mega-event show us the bidders believe such events to

generate positive impacts. In this paper, we analyze through a descriptive

approach the main aspects of potential economic and social effects

through the organization of the World Cup, while contrasting it with the

major cost and risks Brazil is bearing.

Our conclusions show that organizing a major sporting event is a unique

opportunity for economic and social development, can accelerate

infrastructure improvement and it is a major factor for gaining in

international reputation, and, therefore, increasing in the long run a

country’s soft power. However, in the case of Brazil, the high cost,

widespread popular discontent, safety issues, lack of planning and

coordination may have an important negative impact, which is likely to

offset the benefits. It has been said that Brazil is the country of the future,

and always will be. The 2014 World Cup, and 2016 Olympic Games will

give a strong indication whether this still holds true.

1. Introduction

The FIFA World Cup is considered one of the largest events in the

world. The football competition between the 32 best national teams in the

world engages billions of people from all continents and cultures. Over the

last century, the growth of major sports events in general has risen,

following the increased commercialisation and the high profile of these

events. These events are also the main drivers of sport development. In

June 2014, Brazil will once again be hosting the 2014 FIFA World Cup 64

years after its first hosting, in addition to the Olympic Games in 2016. The

country that will host the World Cup is very much changed during these

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64 years. It is now the 7th largest economy in the world and one of the

largest manufacturers of aircraft and one of the largest producers of food

in the world (Worldbank.org, 2014). It is a country with a population of

201 million who have built a consolidated economy and democracy. In

addition, it is considered as one of the biggest soccer nations of the

planet, and the ‘Selec ̧ão’, the National Team, is, uniquely, 5-time World

Champion. However, the requirements to host the World Cup have also

changed, and such a mega event needs to be meticulously planned and

organized, meeting short deadlines and high standards. Therefore, a

significant commitment is required by public authorities in order to face

these challenges. Since the host country was announced by FIFA on

October 20, 2007, a national effort has been carried out to prepare in the

best way possible this event.

The Brazilian government’s objective is to use the event as a means to

spur the country’s development and to generate jobs, to overcome

inequalities and improve the quality of life of its population. It is a unique

and important opportunity to boost Brazil’s international image and to

make investments in projects and services that will remain as a long-term

legacy. The aim of the government is to convert this significant

opportunity into a positive legacy for the country and its population.

However, in a tense context of economic crisis and instability, public

authorities must carefully assess the costs and the benefits from hosting a

mega event. By increasing investment in infrastructures and expertise,

hosting a mega event can turn out to be a strong driver for economic

development. In addition, these events reach a worldwide audience,

putting the host country’s reputation at stake. The objective of this study

is to contribute to a better understanding of a widely followed major

current event and to determine how this mega-event will be utilized as a

means for sustainable socio-economic development while paying due

attention to the costs, risks and constraints. We are going to analyze

through a descriptive approach these different impacts that a mega event

has on its host country. We will thus examine the trade-off between the

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possible positive social-economic impacts and the costs, both financial and

non-financial, of organizing the event. In the conclusions, we confront

expected benefits and costs to answer the key question: is the event

ultimately likely to enhance Brazil's reputation and contribute to its social-

economic development?  

2. Economic Impact

The potential major positive impact of organizing a mega event such

as the FIFA World Cup 2014 is without any doubt the main reason for

countries to host the event. Apart from political considerations, such as

boosting national prestige, economic considerations are an important

motivating factor for states to make a bid to host a major sporting event.

Nevertheless, the desire to be appointed the host of a sport mega-event

and the need of having to constantly develop new and upgrade existing

sports and tourism infrastructures has led cities and countries to be

“caught in a vicious cycle of having to provide larger subsidies to finance

projects that deliver even fewer public benefits” (Leitner & Garner, 1993).

Chappelet (2006) categorized the economic impact as a legacy deriving

from the organization of a mega-event. The FIFA World Cup attracts an

enormous audience. Therefore, likely high tourist inflows are an expected

economic benefit. In fact, according to the federal government forecasts,

for the 2014 World Cup in Brazil, a total of 3.7 million between national

(3.1 million) and international tourists (0.6 million) are expected

(Ernst&Young, 2011). The large amount of tourist inflow is obviously an

opportunity for the host country to generate additional revenues. In fact,

the tourist inflow is expected to generate US$ 5.9 billion for Brazil

(Ernst&Young, 2011). Tourist inflow will benefit mainly businesses in the

service sector, such as hotels, restaurants, etc., and will also generate tax

revenues. However, when considering such an event, one should bear in

mind that the measure of the real economic effects on a host city should

be compared only with the economic indicators of the city if the event

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would not have taken place, the so called ‘without case’ (Hanusch, 1992).

The success factors of the World Cup are the infrastructures needed for

the ongoing of the event. The non-adequacy of the existing Brazilian

infrastructures made restoration and building necessary. First of all,

twelve cities were chosen to be the host cities (in alphabetical order: Belo

Horizonte, Brasilia, Cuiaba, Curitiba, Fortaleza, Manaus, Natal, Porto

Alegre, Recife, Rio De Janeiro, Salvador, Sao Paolo). These cities were

chosen on their ability to host matches during the competition. A further

six cities were also candidates but not selected (Copa2014.gov.br1, 2014).

Stadiums can be considered as the essential infrastructure for the

organization of a football event, and need to fulfill the strict requirements

of the FIFA to be entitled to host matches of the World Cup. Several of the

host cities did not have a stadium, which met these requirements.

In US Dollars

Total Renovation Costs for Stadiums 2 Billion

New Stadiums (Natal, Recife, Salvador) 650 Million

Projects to improve passenger terminals,

marine and land access to terminals

574.8 Million

Improvement of Airports 3.45 Million

Source: Ernst & Young, 2011

Therefore in Natal, Recife and Salvador, new stadiums were built for a

total investment of R$ 1,471.2Million (US$ 650Million) (Ernst&Young,

2011). The other nine stadiums in the other host cities also needed

renovation to comply with the FIFA requirements. The total investment for

stadium construction and renovation is estimated to be R$ 4.62 billion

(approximately US$ 2 Billion) (Ernst&Young, 2011). Those expenses are

only related to the competition itself, i.e. the matches only. Additional

investments are required for the infrastructures needed to receive the

supporters. The expected inflow of 600 thousand international tourists and

3.1 million national tourists requires the country to up-date and expand its

current infrastructures necessary for the staying of the visitors. A major

challenge for dealing with the high inflow of tourist is the capacity of the

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airports. The necessary expansion and improvement of Brazilian airports

started in 2011, and the total investment is expected to be US$ 3.45

million. Nowadays some airports are already overloaded, especially the

ones of Brasilia and Sao Paolo, which are main hubs for travel to other

regions of the country. A monorail train has also been constructed to

connect the subway to Congonhas airport and Morumbi stadium in Sao

Paolo (Ernst&Young, 2011).

Not only the air transport facilities have been renovated and expanded,

the government spent US$ 574.8 million in projects to improve passenger

terminals, marine and land access to terminals. The government is in fact

expecting a high amount of cruise ships to dock on the Brazilian coast

(Ernst&Young, 2011).

The hosting of the World Cup 2014 will generate an increasing demand for

hotels in the selected host cities on the short, and hopefully on the long

term, due to two factors, the fans assisting to the event, and the tourists

visiting the country due to its global exposure as a holiday destination if

the event will result being a success. Nevertheless, among all the host

cities only Sao Paolo, Rio de Janeiro and Curitiba are prepared to meet the

tourist inflow. The other nine cities are expected to receive more tourists

than their actual capacity of hosting. Therefore an investment of R$ 3.16

Billion (about US$ 1.5 Billion) has been made in order to add 19.493

housing units to try to cover the housing deficit (Ernst&Young, 2011).

Nevertheless, the expected high amount of cruise ships could also be a

partial solution to the housing issue. Thus the organization of the FIFA

World Cup clearly does provide an opportunity for Brazil to modernize its

infrastructure.

The organization of a mega-event like the FIFA World Cup can

undoubtedly create a large number of jobs directly related with the

organization of the event itself. However, the expansion of infrastructure

and the increased volume of tourists stimulates job creation. Schimmel

(1995) noted that mega-events mostly generate jobs in the service

sector, which are often part-time rather than permanent, and/or low paid.

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Nevertheless, it is expected that from 2010 to 2014 in Brazil 394,000

permanent jobs will be created as well as 381,000 temporary jobs

(http://www.brazemb-ksa.org, n.d.). These numbers are close to the ones

announced by Ricardo Gomyde, the special advisor to Brazil’s Ministry of

Sports. In fact, he expects 332,000 permanent jobs and 381,000

temporary jobs to be created through 2014 as a result of World

Cup, mainly as the result of new hotels, airport and renovation of football

stadiums (Rapoza, 2011).

As an overall effect, the hosting of the World Cup is forecast to generate

US$ 70 Billion in the nation’s economy according to Brazil’s Ministry of

Sports (Rapoza, 2011). This takes in account the country’s public

investment into infrastructures, the private investments, the increase in

consumption and the increased activity in service related jobs, and

obviously tax collection. In fact, the hosting of this mega-event is

foreseen to generate more than US$ 30 billion in direct taxes and US$ 10

billion in indirect taxes. This can be explained by the increase in

consumption of Brazilian goods and services by an expected US$ 3 billion.

The FIFA even expects the event to generate an additional $116 billion to

the country’s GDP for the 2010-2019 periods (http://www.brazemb-

ksa.org, n.d.).

Crompton (1995) points out that the economic impact of a mega-event, in

this case the FIFA 2014 World Cup, can be defined as the “net economic

change in the host community that results from spending attributed to the

event”. In other words, the economic growth of the host country is not

necessarily provided by the direct income such as ticket sales,

sponsorship and television rights, which are shared with the organizing

body (in this case the FIFA) and usually cover only the costs of organizing

the event itself. He claims that the economic impact of such an event is

mainly thought in terms as the possibilities it provides of increasing the

awareness of the country as a tourism destination. Increasing long-term

tourist inflows will bring additional revenues. Moreover, there is likely to

be an increase in awareness of the country’s potential for investment and

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commercial activity. Therefore a host country is able to attract both

investments and tourists and, as a consequence increase employment and

stimulate the economic growth. In fact, the hosting of the World Cup and

the tourist inflow generate direct revenues on the Brazilian households. For example, consider the income of a professional involved in the tourism

sector, the increase of income due to the inflow of tourist can contribute

to the increase of purchase of home goods (e.g. a new car), representing

an increased demand in home goods. This has a positive effect on the

purchasing power of Brazilian households as a result of the additional

generation of revenues.

Source: Ernst & Young, 2011 Source: http://www.brazemb-ksa.org

It is clear, however, that all the expected benefits have to be set against

the cost of the organization of the World Cup. According to the official

budget, the public sector is supporting the planned projects covering

85,5% of all the expenses. The remaining 14,5% is provided by the

private sector only in the building and renovation of airports and

stadiums. The federal government is the primary investor with 62,1% of

total expenditure and 72,7% of total public expenditure. Local

governments instead contribute with 23,4% and 27,3% respectively for

total expenses and total public expenses (http://www.brazemb-ksa.org,

n.d.). The two major development financial institutions of Brazil, the

National Economic and Social Development Bank (Portuguese acronym

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BNDES) and the Federal Savings Bank (Portuguese acronym CEF) are the

main funding for the federal government totaling an amount of R$ 11.1

billion (US$ 5 billion) (Ernst&Young, 2011). Most of the funds have been

spent in stadiums, touristic related projects and for urban mobility

purposes. The spending made by the federal government through its

budget is amounting R$ 7 billion (US$ 3 billion) (http://www.brazemb-

ksa.org, n.d.). The cost of organizing such a mega-event should be

balanced by public and private investments in order to increase the

benefit, and decrease public spending. A recent example is the Winter

Olympics in Sochi, Russia, where a Targeted Federal Programme for the

Development Sochi was implemented aiming at modernizing the region in

order to make the Caucusus a new destination for winter sports. This

development program was financed 60% through public spending and

40% by private investors (IOC evaluation commission report, 2014).

3. Social Impact

As we have analyzed in the previous chapter, organizing a World

Cup has a significant economic impact on the host country. We are now

going to focus on the social effects, which, though highly interrelated with

the economic impact, merit to be dealt separately.

All the services related to the World Cup must be prepared to receive

tourists from all over the world. The increase in tourist inflow during the

World Cup raises an issue of qualification of the workers in the country. In

fact, the tourism professional Brazilian will have to deal with an unusual

increase of the tourists, and might not be fully prepared, or qualified to

assure the well-being of the national and foreign tourists.

Therefore, the Ministry of Tourism took action to deal with this problem

and will provide higher qualified professionals with the Bem Receber Copa

project, in English the ‘World Cup Well Received.’ This project aims to

train 306 thousand workers by the end of 2013 to work in the tourist

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area. The Federal Government estimates this investment to be $280

million (Copa2014.gov.com2, 2014).

Moreover, the FIFA provides the host country with a Volunteering

Program, one of its flagship programs, where volunteers all over the world

come to help with the organization and support the tourists. This could

lead to an increase in education and training through the help of

multicultural, multilingual volunteers that will help Brazil with the

organization of the event (Fifa.com, 2014).

The World Cup can also be a factor of social inclusion (Rebelo, 2013). As

is common knowledge, Brazil is one of the biggest “Football Nations” in

the world, and football is taken very seriously. This could enhance national

unity and pride since the country is hosting the major football event.

Essex and Chalkley (1998) have put forward that sporting events are able

to strengthen national traditions and values and also enhance national

pride and community spirit. This was the case for the 2010 World cup was

held in South Africa, where for the first time in history the World Cup was

being hosted by an African country. This led to a major enthusiasm not

only in the South African people, but also in the whole continent, and the

event was seen as the regeneration of Africa led by ex-president and

national hero Nelson Mandela, who was a strong supporter of the event.

The hosting of the World Cup can be seen as a way to accomplish social

cohesion driven by the enthusiasm of the people. The final result of the

national team, if highly successful, can very much enhance this impact

(Dauncey and Hare, 1999).

This enthusiasm driven by the host of a major sport event may also lead

its people to increase their own participation in sport and as Hooper

(2001) has claimed, this increase may, in turn, enhance social cohesion

and social interaction since it provides a sense of well-being, that could

help integrating people that may feel socially excluded. The increase in

sport participation is also facilitated by the large sport facilities that are

built in order to host the event, and that could be available to the

community after the event’s occurrence. This is also further enhanced by

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the hosting of the Olympic Games in 2016, which will even further

promote the inclusion of sports, since art present Brazil lacks high

performance athletes and does not have a great diversity of sports

practiced. Access to sport is not only essential for a healthy population,

but it also promotes social mobility. In fact, the first Brazilian modern day

heroes who came from the poorest layers of the society were the football

stars.

Therefore, the increase in sport participation could have a significant dual

impact on the well being of both individuals and community as a whole.

This increase in sport participation cannot only be achieved through the

construction and renovation of sport facilities, but support of the

government is also needed in the training of public and community agents

to encourage the promotion of sport.

The local government will be supported by a number of private

volunteering and charity programs, such as streetfootballers and Ashoka

created through the Clinton Global initiative who established a social

legacy fund aimed at pooling financial resources from international

funders in order to provide support for local, football-based development

projects (Griesbeck, 2013).

Another positive effect may come from specific national campaigns

organized in the countries participating in the World Cup. The Netherlands

authorities, for instance, have launched a major awareness-raising

campaign on child prostitution for Dutch fans travelling to Brazil

(dontlookaway.nl, 2014). Fans are encouraged to report such child abuse,

which hopefully will contribute to combatting this scourge in Brazil.

But just as the hosting of a major sport event can bring positive effects

for a local community, it can also end up having negative effects. The

bidding for the tournament had emphasized the social benefits that the

World Cup would bring, which now seem to have been forgotten. Several

aspects threaten the social impact of the tournament. A first aspect is the

failure to respect safe working conditions. In fact, numerous building

works at stadiums have been interrupted such at Curutiba. These

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violations of safe working condition have reportedly led to the death of six

workers during the building of stadiums (BBC News, 2014).

The hosting of the World Cup should be seen by public entities as an

opportunity for development. In this sense, benefits arising from the

mega-event should benefit the local population. But the Brazilian

government implemented some controversial measures and policies. One

example is the displacement of Brazilians, who live on lands that are going

to be repossessed for use during the World Cup. An estimate is that up to

170,000 people will be evicted from their homes (Zibechi, 2012). The

pacifying police unit (Brazilian acronym, UPP) was appointed by the

government to evict people from the favelas (the shantytowns that

surround Brazil’s big cities) in order to present a better image of the

country when tourists will start to arrive (Brown, 2014). These measures

must comply with human rights, and the government must assure a fair

compensation for the housing repossession, if it wants to limit protests

and keep a positive international reputation for hosting the tournament.

In order to increase the safety of the tourists during the competition, the

Federal Government started a militarization of the favelas The federal

army already sent 2700 soldiers to the favelas in Rio de Janeiro, and more

are expected at the starting of the World Cup (Livewire.amnesty.org,

2014). In fact, in 2013, during the Confederation Cup, the so-called

Brazilian Spring took place (Fusion, 2013). More than one million people

protested in the streets all over the country mainly against the rise in

public transports, but grew to include other problems as the controversial

constructions and renovations, the brutality of the police, and generally,

the corruption of the government. During the riots, many people were

injured and a man died in Belo Horizonte (Usatoday.com, 2013).

Moreover, the Government has initiated strong action against weapons

and drugs smuggle, as well as illegal immigration along its borders. This

military operation is called “Ágata 8” and 30.000 soldiers are involved, as

stated by the Brazilian Ministry of Defence. The action was discussed

before with Brazil’s ten neighbouring countries. A similar mission was

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carried out already in 2013 for the Confederations Cup (Süddeutsche.de,

2014). This drastic measure taken by the Federal Government and this

kind of “civil riot” climate, due to the numerous soldiers in the streets of

the capital, will on the one hand increase the security for the tourists, but

on the other hand, have a negative aspect on the sports atmosphere.

The enhancement of public transport due to the hosting of the tournament

is an opportunity to increase community services. Nevertheless, in June

2013, coinciding with the Confederations Cup - a World Cup test event,

the price of public transport was supposed to be increased. But this price

increase has been postponed, due to the hard protest that took place in

the biggest cities of Brazil. The riots were the result of the people’s

disapproval of high fares, corruption, police violence and street crime

(Watts, 2013). These protests showed that many Brazilians do not see the

benefits that the hosting of the tournament could bring them, and feel the

government is investing more in useless infrastructure rather than

improving the average Brazilian’s living conditions. This could result in a

strong negative impact if the local community does not believe the

tournament is going to benefit them, and this could result in a loss of trust

in the national institutions. Many Brazilians oppose the government’s

investing money to renovate and build new stadiums and believes that the

national institutions should be closer to the people and focus on their

priorities. The government needs to take measures in order to justify in a

better way its investment for the World Cup, as well as for the Olympics in

2016, to avoid further and possibly escalating protests from its

population.

On balance, one can say that the social impact is a mixed picture. The

social inequalities, the poor public services and the consequently chronic

crime made the federal government take drastic methods to increase

short-term safety (until the end of the event). But this can also be an

opportunity to finally tackle this issue and propose long-term actions to

decrease the crime rate and the insecurity in Brazil. Moreover, the

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benefits generated by the event, if spent on major social projects, could

bring long-term positive effects on social cohesion.

4. Sustainability

As Griesbeck (2014) claims “the World Cup in Brazil is going to be

the next quest to increase international awareness of football’s potential

to affect positive change. And to ensure that the costs of these events do

not outweigh their social and economic benefits, we need a strong

commitment to a sustainable social legacy.” Football is considered as the

most practiced and followed sport in the world. In this sense, football is

not only the practicing of the sport, but is also used as a window for

values and morals (e.g. fair play, fighting racism). Sustainability is also

one of those aspects that football is promoting. Thus, it is crucial that a

mega-event as the World Cup needs to conform to sustainability rules in

order to safeguard the environment and produce positive legacy for the

long term (Hall, 2012). If there is a cost for governments and for the

organizations to comply with environmental and social responsibility, the

benefits are not negligible; contribution to the good reputation of

companies and public organizations; and opportunities for investment in

the carbon market (Ernst&Young, 2011).

The most straightforward aspect concerns the building and renovations of

the stadiums. In 2012, at the United Nation Conference for Sustainable

Development in Rio, the local organizing committee presented its strategy

to organize a sustainable event. Moreover, FIFA’s head of corporate social

responsibility, Federico Addiechi, claimed an investment of 20 million US

dollars would be made in order to support the community with waste

management, and renewable energy recycling. This has resulted with the

hosting stadiums to be equipped with solar generators to generate

energy, and the water will be filtered from the rain, the water used for the

showers will be recycled for the pitch irrigation (Copa2014.com3, 2014).

Their desire is to succeed building stadiums with LEED certifications

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(Leadership in Energy and Environmental Design). This certification,

created by the US Green Building Council (USGBC) is based on two

principles: the reduction in waste and employed resources, the

reutilization of the materials and the recycling of materials. Of the twelve

cities chosen to host the event, only the stadium in Fortaleza, the

Castelão Arena, which was the first to complete its renovations, received a

LEED certification. In addition, the FIFA and the Local Organizing

Committee established a sustainability-training course for all the stadium

operators. The goal is to “strengthen the participants knowledge of

sustainable operations at soccer stadiums and other sport facilities”

(Environmental Management & Energy News, 2013).

The FIFA’s objective for the 2014 World Cup is to organize a pillar

sustainable event that can be considered in the future as a model for the

next mega events, as the World Cup in Russia (2018) and Qatar (2022)

(Fifa.com, 2011).

This socioeconomic analysis cannot be dissociated from analyzing the

environmental impacts of the event. Investing in a more sustainable

event, means contributing to a decrease in inefficiencies, in social and

environmental costs, as well as waste. The United Nations Environment

Program (UNEP) claims that six crucial areas must be considered for their

economic, social and environmental indicators: ecosystem management,

environmental governance, disasters and conflicts, climate change and

harmful substances and efficient use of natural resources (Pnuma.org,

2014). Concerning the relation with the local community, it is essential to

“ensure urban quality, accessibility, security, access to information,

environmental education and usefulness of facilities, as well as urban

interventions after the event” (Ernst&Young, 2011). The government and

other private entities involved in the organization of the World Cup need

to ensure the responsible management of raw materials, as well as the

use of natural and economic resources.

One striking element is the reduction of carbon dioxide (CO2) emissions

from the combustion of fossil fuels, a major cause of the greenhouse

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effect. The “Green Goal” program has been established by the FIFA since

the 2006 World Cup in Germany together with the Local Organizing

Committee (LOC) aiming at environmental protection and has since then

is strengthened. For the 2018 and 2022 World Cup new measures have

been considered in the bidding such as the establishment of an

Environmental Advisory Board, which deals with issues regarding energy,

water, waste, transportation, as well as climate change

(Businessgreen.com, 2014). As regarding the 2014 World Cup, Jerome

Valcke the secretary general of FIFA, announced that emissions would be

reduced through implementing verified carbon offsetting projects

encouraging stakeholders to reduce their carbon footprint (Valcke, 2014).

The carbon footprint measures how much carbon dioxide is produced by

all activities of the even arising from the combustion of fossil fuels. The

organizing body expects the Brazilian World Cup to generate over 2.7

million metric tons of CO2, of which transport alone will generate 80.1

percent of the carbon footprint (Valcke, 2014).

Nevertheless, the carbon-offsetting plan does not have a full outline of its

range of action and precise goals. Therefore a drastic improvement could

be obtained by adopting a carbon-offsetting project, which goes beyond

planting trees (which is currently the most advertised alternative) to

reduce CO2 in the atmosphere arising from the combustion of fossil fuels.

Ernst & Young specialists claim one solution could be “a carbon offsetting

program, which encourages the use of vehicles that run on ethanol or

biodiesel, the search for energy efficiency of companies, “green building”

projects and monitoring of carbon emissions before, during and after (the

event)” (Ernst&Young, 2011).

To strengthen the environmental dedication of the Brazil World Cup, the

FIFA decided, upon request of the NGO Associaçao Caatinga (committed

to the protection of the Amazonian Forest), that the Armadillo would be

the mascot of the event. This animal not only represents the biodiversity

of Brazil but is also threatened with extinction (Atlantico.fr, 2014).

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5. Risks and Constraints

For the country to benefit fully from the hosting of the World Cup, specific

risks and constraints must be considered.

The current turmoil before the World Cup is a symptom of the situation of

the nation: instead of an ongoing dynamic, the country apparently faces

only doubts and gaps. The mass protests in summer 2013 showed that

the growing middle class does not let things happen against their will and

without their agreement. The tax burden for the people, and for the

entrepreneurs rises constantly and represents now up to 36 percent of the

Gross Domestic Product (GDP) (Rüb, 2014). The underperformance of the

inefficient administrative organization is on all levels significant. Only a

small number of public schools reach their educational mission, therefore

private educational institutions are in a boom. The governmental health

system is not financed enough and is overstrained; and cannot

sustainably get better through the import of thousands of doctors from

Cuba (Lehman, 2014).

The inadequate public transport in Brazil’s agglomeration is the result of

the growing urbanization - almost 90 percent of the 200 million Brazilians

live now in the cities. Meanwhile, more and more cars choke the

metropolises and the transport of goods goes over old and ill-maintained

railways. Brazil’s investments into the infrastructure are only around two

percent of its GDP, a low amount compared to the more than five percent

of developed countries (Rüb, 2014).

The Brazilian government tries to increase its income through

unproductive measures. In addition, 90 percent of violent crime in the

dangerous cities of the country remains unsolved (Rüb, 2014). This is the

reason for the boom of private security companies: which represent

almost one percent of the country’s economic activity (Rüb, 2014). Over

one hundred thousand men in Brazil spend their best working years as

upper-and middle class security guard, who live behind tall walls in the

main cities. Of course, the security guards and their families have a

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medium-high income through this business and it is a support to keep the

unemployment rate low. But the productivity is significantly low and

security guards only fill a gap that the authorities left open (Rüb, 2014).

Furthermore, as mentioned above, general taxes and excise taxes, but

also the burden of bureaucracy and corruption is as high as nowhere else,

and are summarized in the notorious term “Custo Brazil”, Brazil Cost

(Leahy, 2014). The strong economic growth from 2003 until 2011 was

mainly because of the domestic consumption of the lower and middle

class that received multiple transfer payments from the leftist government

under president Luiz Inácio Lula da Silva. But Brazilian society is in poor

shape since the assumption of office of president Dilma Rousseff. The

economy is growing slowly, the inflation pulls, investments and loans

decrease, bankruptcies rise (Hughes, 2014). The national economy of

Brazil cannot protect itself behind protective barriers and arm for global

competition, which will overtake the country soon.

The needs of Brazil can be categorized in “small needs” and “large needs”.

Those can be satisfied by means of “bottom-up” or “top-down” public

policies and actions (Ernst&Young, 2011). These two different approaches

present different positive impacts and as well as weaknesses; but the

risks are identical, as are the costly interventions and bureaucratic

inefficiency. Brazil’s long tradition of vertical planning, where the decision

making process is made by the government and spread out to the

different local public institutions and authorities remains a problem. There

is often very little local autonomy, and consequently very little control

over the agents responsible for the policies, and therefore very little

feedback on the efficiency or effectiveness of policies and actions on a

local level. These issues are present in all the relationships within the

public institutions, more specifically between the central government and

the other entities, but also at state and municipal level. These risks are

increased by implementing a “top down” public policy, because due to the

imperfections in the decision making process, the actions can result

ineffective, highly costly, or simply do not have any effect.

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Regarding the central planning issues, one can observe the “crystallization

and political takeover of public administrations at various levels, which

represent a significant obstacle to the implementation of bottom-up

policies” (Ernst&Young, 2011). In Rio de Janeiro for example, attempts

such as the subdivision of in sub-city halls (“subprefeituras”) crashed into

coordination issues, more specifically between the shared and individual

responsibilities of the community (Grin, 2011). This lack of organization

and coordination also resulted in delays in the construction of the

stadiums, which worries the organizing body, and is putting Brazil’s

international reputation at stake.

The major risk that Brazil is incurring concerns the significant investment

it has made for the hosting of the World Cup, making use of private and

public resources that could, and according to many Brazilians should, be

used for different purposes – such as for hospitals, schools, etc. This

trade-off carries an opportunity cost. This opportunity cost is significant,

since most of the positive impacts are temporary, and the legacy depends

on how much the host country capitalizes on its investments

(Ernst&Young, 2011).

Some constraints are represented by the bargaining between the host

country and the FIFA. A controversial aspect of hosting a World Cup is

that the FIFA requires a country to temporarily change their laws to

comply with its requirements. Those requirements enable FIFA to

decrease country tax payments and prevent other than sponsor-

businesses to be associated with the tournament, and in the case of

Brazil, allowing the selling of alcohol inside the stadiums, which are

currently banned in Brazil. A key point comes from the sale of the tickets,

which will mostly benefit the FIFA. In addition, the high prices of tickets

increased the dissatisfaction of Brazilians. The Brazilian sport minister

Aldo Rebelo has managed to negotiate a 50 percent discount for the

elderly population and for students, claiming that the initial price was

unacceptable for Brazilians. Rebelo insisted explaining that the World Cup

should be a celebration of the Brazilian people, and high prices would

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prevent most of Brazilians from attending the matches (FoxSoccer, 2014).

The fact that the prices are so high, due to inflation, and the major

security issues that Brazil is facing, could also result in a decrease in the

number of expected tourists.

6. Long Term Opportunities

As set out in the previous chapter, the hosting of a World Cup carries a

significant opportunity cost. Nevertheless, the bid to hosting the World

Cup is highly competitive because countries believe they can benefit of

long-term opportunities. Of course, to obtain the greatest returns on the

hosting of the event, Brazil’s actions and investment must be carried out

efficiently. This means, carrying them out at the lowest cost possible (in

terms of time and of resources) to obtain the planned results. Generally,

the success of a project can be summarized by three major objectives, the

meeting of the deadline, the required quality, and finally, meeting the

estimated cost. This is the so-called triple constraint triangle of project

management (Dobson, 2004). Concretely, this supposes the performance

of the actions to achieve the project within the deadlines and the budget,

while ensuring the quality.

The World Cup does not only bring investments in infrastructure, but more

importantly, it mainly brings media attention together with an increased

economic activity and numerous opportunities for the federal government

as for the whole society itself (Pauw & Witteman, 2014).

The World Cup offers an opportunity to its host cities, which goes beyond

the single event. In fact, it can be considered that the hosting of such an

event becomes a landmark for the history of these cities. These locations

can benefit of an increase of revenues, which can be reinvested and are a

huge opportunity to improve the quality of life of the citizens (2014 FIFA

World Cup and 2016 Olympic Games: Brazil’s Strategy ‘to Win Hearts and

minds’ Through Sports and Football, 2013). In addition, the benefits for

the country as a whole can be observed by the rapid growth of

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infrastructure building and renovation that would take much longer if the

event would not take place. In fact, the large investments of the

government in infrastructure for their improvement and expansion,

regarding the stadiums, urban mobility, and airports and ports, clearly

benefit Brazil. These effects may not be immediate, but will be

measurable in the long term.

The development of communications and the investment of the media in

the World Cup are also a key long term opportunity, and plays a

fundamental role in what can be considered the more striking impact of

the hosting of such an event, the reputation of the organizing country

(Pauw & Witteman, 2014). Brazil can benefit of an advertisement of its

country, showing the world, besides the World Cup events, that it has

centers of excellence in innovation, a strong economy and multicultural

and modernly developed cities (Ernst&Young, 2011). The federal

government will need to take advantage of these opportunities by

implementing efficient planning, control, monitoring, without neglecting

reputation management, transparency, sustainability and legacy. The

revenues generated by the event in its various sectors as we analyzed in

our previous chapter is without any doubt significant. Yet the country’s

reputation gain provided by the success of the event can be more

significant than the gain in revenues. As explained previously, the self-

esteem of Brazilians in general can be positively affected (Ernst&Young,

2011).

The event itself is of course not only a sporting event, but can also be

considered as political. It is the consecration of a country on the

international scene. In fact, studies have showed that mega events are

vehicles used to strengthen the soft power, i.e. international influence, of

its host countries (Black and van der Westhuizen, 2004; Cornelissen,

2012). For former president Lula Da Silva and current president Dilma

Rousseff the hosting of the World Cup in 2014 and the Olympic Games in

2016 will make the international public opinion think that Brazil is non

only becoming a global actor, but a giant economic power (2014 FIFA

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World Cup and 2016 Olympic Games: Brazil’s Strategy ‘to Win Hearts and

minds’ Through Sports and Football, 2013). Thus, the tournament can

contribute with great impact to improve the country’s image abroad as it

awards a certain prestige on the international scene. Indeed, sport has

always permitted countries to show their strength and power. This is a

real political tool to legitimize itself in the international arena and to

obtain recognition. The success of the event is thus more than necessary

and the way the country is going to take advantage of this positive image

will result in long-term impacts on its reputation (2014 FIFA World Cup

and 2016 Olympic Games: Brazil’s Strategy ‘to Win Hearts and minds’

Through Sports and Football, 2013). Moreover, a good reputation leads to

positive effects deriving from it. As examples, one can think of an increase

of foreign investments, a greater flow of tourism, as well as a higher

credibility and visibility of Brazil (Pauw & Witteman, 2014).

The success of the event is also linked to what involves the planning, the

sport efforts, the cultural activities and all the supplementary activities

that will be organized that create a certain “World Cup atmosphere”. An

atmosphere where people get engaged, such as cultural events, artistic

events, or festivities, that represent the country’s identity and sponsors it

in a strong way (Ernst&Young, 2011).

In the long term, we can also say that the reputation gain derived from

the host of the World Cup is also related to the legacy that will remain. If

at the end of the tournament, the feeling is that the event was a success,

and that it left a positive legacy to the local population, Brazil will gain in

reputation. Consequently, it is vital that the Federal Government avoids

leaving a huge debt or building costly infrastructure that will become

useless at the end of the event (Ernst&Young, 2011). This, will result not

only in savings the public budget, but will also avoid that the World Cup

becomes an exponential trigger for further massive social protests and an

increase in the general dissatisfaction of the Brazilian people.

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7. Conclusion

The organization of a World Cup is very challenging for its

organizing country. The event is highly costly and the repercussion on the

local population may be not favorable, especially during times of economic

crisis, as is clear from the widespread social unrest that developed. In

fact, the public budget that is spent for the event could, in the views of

many much better, be spent in order to improve education, healthcare,

housing etc. However, as we have seen, organizing such a mega-event

can be a significant opportunity for progress. Therefore, a key question is

whether the organization of the 2014 FIFA World Cup can be welfare

enhancing for Brazil? Firstly, it can improve the economic situation not

only temporarily, but also in the long term. Furthermore, this sport event

can contribute to the social inclusion of the underprivileged, and improve

people’s self-esteem, along with gains in education through the

experience of the tournament. On top of this, some sustainability aspects

have also been considered, with the construction of “green”

infrastructures, which will result in savings of waste and money in the

long run. Of course, the mega-event’s ultimate success will be measured

in different ways by the various stakeholders. From the point of view of

the visiting tourists, success will be characterized by enjoyable, accessible

events associated with quality of service, and safety. For most Brazilian

people, it will be measured by their enjoyment of the economic and social

benefits, especially in the longer run. On the other hand, for the

government, the success of the event will be measured by a generation of

revenue, the reputational gain, credibility and visibility.

Nevertheless, with the World Cup not even started, the important social

tensions and already significant delays in the ambitious infrastructural

projects show Brazil’s limitations in planning and coordination, as well as

in effectively communicating the expected benefits. Combined with the

already high costs, the event could thus result in significant overspending,

and increase Brazilians’ already critical attitude towards the event. The

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government’s strong emphasis on repressive measures, apart from being

costly, could also backfire and provoke even more violence. The World

Cup will also certainly dominate the forthcoming presidential elections in

October 2014 when Dilma Rousseff's policies will face a severe test.

Brazil’s ability to manage the FIFA World Cup 2014 will be a clear

precursor for its performance as regards the 2016 Olympic Games. Both

will very much shape Brazil’s immediate future, as well as its image in the

world for many years to come.

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