Hopes for a World Cup economic boost are fading fast in Brazil
posted at 1:21 pm on May 28, 2014 by Erika Johnsen
I don’t regularly follow soccer/football/fútbol/calcio/etcetera, but I am excited to watch the World Cup beginning this June. This edition’s host country, Brazil, has been pretty jazzed about the World Cup too, and not just because it’s full of insanely enthusiastic soccer fans and one of the world’s top teams; the country has been hoping that the World Cup and the accompanying billions on billions in tourism and advertising dollars would provide the once prosperous and now severely lagging country with a much needed economic boost. Unfortunately, and yet totally predictably, Brazil has systemic fundamental problems that not even a gigantic international rage-a-thon can cure, via the WSJ:
“Look how many billions were spent on the Cup and how much got down to us,” said the 38-year-old hotel worker, who lives in Rio’s Santo Amaro slum, a labyrinth of narrow alleys not far from Maracanã stadium, where the Cup final will be played.
Mr. Monteiro’s shift from World Cup fanatic to protester highlights a wave of disillusionment that has swept Brazil ahead of the event, which begins June 12. Such bitterness was once unimaginable. Passion for World Cup soccer runs so deep in Brazil—the winner of more Cups than any other nation—that people here say they live in a “country of soccer.” Still, just 48% of Brazilians now say hosting it was a good idea, down from 79% in 2008, according to an April 8 poll by Brazil’s Datafolha, the most recent.
The explanation goes beyond sports. For many Brazilians, the Cup has become a symbol of the unfulfilled promise of an economic boom for this South American nation. But the boom has fizzled. And now the World Cup’s $11.5 billion price tag—the most expensive ever—and a list of unfinished construction projects have become reminders of the shortcomings that many believe keep Brazil poor: overwhelming bureaucracy, corruption and shortsighted policy-making that prioritizes grand projects over needs like education and health care. …
Across Brazil, $3.6 billion in taxpayer money has been poured into stadiums, as much as the stadium bill for the past two Cups combined, and builders are still racing to finish. Meantime, work on airports, roads and other long term projects promised to benefit development in Brazil became hampered by bureaucratic squabbles, allegations of corruption and other obstacles. With days to go, the stadiums are mostly built, but the areas around them often resemble construction sites.
This infrastructure fiasco is starting to sound like Sochi all over again. The WSJ goes on to describe beach-scene canvasses as emergency cosmetic fixes for incomplete structures, tents for airport terminals, unfinished roads and building projects, and a planned light-rail system that is little more than an “unfinished stretch of rubble” — and the unifying theme here is that they all got thrown off schedule by squabbles borne of too much bureaucracy and corruption. Now opposition and even protests are breaking out again as Brazilians are getting mighty upset, not about the tournament itself, but rather with their government’s wildly expensive attention to it compared with the country’s prevailing lack of robust prosperity.
It has become a political headache for Brazil’s left-wing President Dilma Rousseff, who is seeking a second term in October elections. Analysts once predicted the monthlong Cup would launch a re-election campaign portraying her as an efficient leader. Instead, Ms. Rousseff will play a low-key role and has decided not to speak at the opener.
What could she possibly have expected, really? Like I said, Brazil has serious problems inherent in their leftist government and semi-planned economy that no amount of temporary tourism and infrastructure surges can fix; I’ll refer you to Heritage’s 2014 Index of Economic Freedom for more background on that front:
Brazil has benefited from surging prices for commodity exports. The middle class is growing, and millions have been lifted out of poverty, but heavy government intervention in the economy continues to cause the misallocation of capital, limit mobility, and fuel a sense of injustice. Ensuring security and adequate infrastructure for the 2014 World Cup and 2016 Rio Olympic games will challenge the government’s administrative capacity. …
Corruption undermines economic freedom and sparked massive nationwide protests in 2013 over poor public services and the low level of political and institutional effectiveness. In the “Mensalão” case in 2012, some members of the Brazilian Congress were found guilty of participating in a pay-for-votes scheme. Contracts are generally considered secure, but the judiciary is inefficient and subject to political and economic influence.
Regulatory efficiency remains poor, and the application of regulations is inconsistent and non-transparent. On average, it requires over 100 days to incorporate a company, and obtaining necessary permits takes 400 days. The labor market lacks flexibility and hinders job growth. Agricultural subsidies doubled from 2011 to 2013 and now total about $10 billion. In 2013, subsidies for electricity were also increased.