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Moody's Predicts Insignificant Returns for Brazil from 2014 World Cup

Moody's Investor Services sees the 2014 World Cup providing a de minimis boost to Brazil's slowing economy.

(RVR Photos/USA TODAY Sports)
(RVR Photos/USA TODAY Sports)

Moody’s, the investor ratings agency, through its Global Credit Research department released a note Monday on the impact the 2014 World Cup will have on the Brazilian economy.  And unfortunately for the Brazilian politique, expectations are quite low:

“Some hope hosting the World Cup will help lift Brazil out of economic slowdown, but the associated economic activity ultimately pales before the country’s $2.2 trillion economy.”

Moody’s anticipates the 32-day event will create a $11.1 billion economic injection temporary in nature with most sectors in Brazil unable to capitalize on this small, fleeting boost in business. The food and beverage, lodging, car rental, TV broadcasting and advertising sectors should see an uptick in activity, but the estimated surge from hosting the tournament will be a nominal drop in the pond that is Brazil’s overall economy.

Preparing for the World Cup has been anything but easy.  Stadium costs alone have come in at over $3.5 billion according to Forbes, which does not include necessary investments in infrastructure, an area in need of upgrades across the country.

According to the World Economic Forum, Brazil’s infrastructure ranks a dismal 114th out of 148 countries.  Per the Economist, only 1.5 percent of Brazil’s GDP is spent on infrastructure investment, well behind the long-run global average of 3.8 percent.

Totaling all investments, Bloomberg has the price tag for this year’s tournament at $14.5 billion.

Keeping the overall context of Brazil’s $2.2 trillion economy in mind, an estimated $3 billion loss on the games ($14.5 estimated cost yielding $11.1 billion in estimate revenue) is nothing compared to the exposure Brazil will receive as the world turns its eyes onto the host nation this summer—for better or worse.

Exposure that can either be priceless or could leave Brazil paying the price.

 

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