Brazil's experience shows need for careful thought

Economy June 14, 2014 00:00

By The Nation

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New research from the Grant Thornton "International Business Report" (IBR) has found that the enthusiasm Brazilian businesses held for hosting the 2014 Fifa World Cup has plummeted over the past two years.

However, while few business leaders predict increased investment or increased profits as a result of Brazil hosting the competition, there is hope that infrastructure improvements and a greater influx of tourists will provide enduring legacies.
“The big sporting events usually bring huge amounts of growth to the hosting country,” said Andrew McBean, partner of Grant Thornton in Thailand and a specialist in the Asean Economic Community. “For example it was estimated that the economic impact of the London Olympic Games was £9.9 billion [Bt544 billion] to the UK in 2012 alone. 
“However, the withdrawal on April 17 by the Vietnamese government from hosting the 2019 Asian Games was a reminder that very careful consideration and planning need to be given to hosting such events in emerging markets. Such a study needs to assess both economic and social impacts. 
“The deadline to submit a bid for these games has been set at July 1, 2014.”
The IBR reveals that the proportion of Brazilian business leaders who believe hosting the World Cup would translate to faster economic growth has fallen from 80 per cent in the first quarter of 2012 to just 33 per cent by the same quarter this year. Similarly, just 11 per cent of businesses currently plan to make extra investments for the tournament, compared with 23 per cent in 2012. A further 19 per cent of businesses expect their profits to rise, with 52 per cent expecting the tourism sector to see the biggest pick-up in activity.
Madeleine Blankenstein, partner of Grant Thornton in Brazil, said: “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 stadium construction and public protests against both the government and Fifa. 
“However, there is now an increased awareness in government and in the private sector of the infrastructure shortfall and what needs to be done, first to get the country ready for the Olympic Games and second for sustainable growth to become a reality.”
More than two in five business leaders expect infrastructure investments – particularly those in the transport sector – to be the most enduring legacy of the  soccer tournament (42 per cent), with a further quarter expecting a greater influx of tourists (26 per cent). However, almost a third believe stadium construction in their city has disrupted daily life and just 40 per cent believe the stadiums will be well used once the tournament is over. “The important thing after the tournament is finished is the asset management,” McBean said. “Of key concern is how to manage and utilise these in the future. 
“Like the ‘Bird’s Nest’ in Beijing and Cape Town’s Green Park Stadium, it is hard to see the Amazon Arena in Manaus being well used after the tournament. However, there are good examples to follow so that stadiums do not fall into disuse, particularly that of east London following the 2012 Olympic Games. The event allowed this previously derelict part of the UK capital to be modernised, and it has subsequently attracted significant commercial and residential investment.
“Thailand has hosted a record four Asian Games, with the most recent in 1998. However, before submitting any further proposals, it is worth pausing and performing deep economic and social studies using updated models and experiences,” he said.