All Finance Uncategorized Venues

A week from the World Cup, FIFA is already the big winner in Brazil

FIFA will generate $4 billion in revenue from the World Cup. Meanwhile, the host city Brazil will be left with a huge bill.

(AP Photo/Keystone,Steffen Schmidt)
(AP Photo/Keystone,Steffen Schmidt)

Brazil has already spent $3.6 billion in tax payer money for the World Cup 2014, which is more than the last two World Cup stadium bills combined.

It is deemed “the most valuable, lucrative and expensive in FIFA history.” 12 new and renovated stadiums will be showcased during the tournament, but what about after the tournament is over?

Many fear that the stadiums will turn into “white elephants,” catching dust in the middle of nowhere, much like previous Olympics and World Cup hosts, Athens and South Africa. In an appearance on HBO’s Real Sports with Bryant Gumbel, American professor Chris Gaffney — who is currently in Brazil teaching and studying the effects of global events like the World Cup — believes that history will repeat itself and stadiums will simply be underutilized public investments that are unable to draw future revenue streams in many of the areas.

The abandoned Olympic softball venue in southern Athens. (AP Photo/Thanassis Stavrakis)
The abandoned Olympic softball venue in southern Athens. (AP Photo/Thanassis Stavrakis)

While Brazil will be receiving many benefits from hosting the World Cup, like tourism and local spending, FIFA will benefit the most — collecting all ticket revenues, television rights and sponsorship money, which amounts to $4 billion. FIFA secretary general Jerome Valcke states his pleasure with this year’s World Cup already “the financial success — we have it, it is done. . . .The ticket sales success is there, we have never sold so many tickets.”

Television networks are paying nearly $1.7 billion in rights fees to FIFA, six partners — Adidas, Coca-Cola, Emirates, Hyundai-Kia Motors, Sony and Visa — paid over $700 million over four years, and FIFA’s eight World Cup sponsors have collectively paid $524 million. FIFA also keeps all the ticket revenues. In addition, FIFA revenue is untaxed in Brazil; World Cup sponsors and media also receive exemptions for their operations as a condition of Brazil’s hosting bid in 2007. Despite FIFA paying for ticketing, accommodation and IT infrastructure, which has benefitted Brazil’s economy, the country will still be left with a very large bill once the tournament ends.

Brazil’s deputy sports minister Luis Fernandes spoke in the Real Sports with Bryant Gumbel piece, commenting that the billions spent on Brazil will have great benefits in tourism, spending, and publicity. He said staging the World Cup would be enough of a win for the host country.

However, many of the stadiums, like the Arena da Amazonia where the US will play, are located in places that are difficult to get to and will be used for just four World Cup games, with no permanent plans beyond the tournament. The Arena da Amazonia, located in Manaus, cost $300 million and is so remote that even if scheduling concerts and cultural events is is considered, getting the thousands of people to attend will be a challenge.

Arena da Amazonia in Manaus, Brazil (AP Photo/Felipe Dana)
Arena da Amazonia in Manaus, Brazil (AP Photo/Felipe Dana)

Gaffney believes that despite what the Brazilian sports minister says regarding financial success for host countries, there is no evidence that hosting a World Cup or Olympics brings economic benefit on a national scale. Gaffney disputes that building new and expensive permanent stadiums has been successful for putting cities in the national spotlight. He used the stadium in Manaus as an example, criticizing that hosting four games will not be enough in drawing attention for the city.

This is a result of poor planning for the future. On Gaffney’s website, he writes that of the nine stadiums that were fully financed by public money, seven have been handed over to a Public-Private Partnership, and for the remaining two (Manaus is one), the government is desperately searching for “elephant trainers.” Whether the government is giving up or is just unable to capitalize on these investments, we will have to wait until after the 2016 Olympic Games in Rio de Janeiro to find out.

Map of 12 stadiums used for the World Cup (Image courtesy of FIFA)

0 comments on “A week from the World Cup, FIFA is already the big winner in Brazil

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: