Home' Trinidad and Tobago Guardian : May 29th 2014 Contents MAY 2014 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG13
Hosting the World Cup might pro-
vide a small boost to Brazil, but it
won t be enough to snap the coun-
try s economy out of its current
Once tipped as one of the brightest emerging
economies, Brazil has seen growth fall off a cliff in
recent quarters as long-term problems bubbled to
the surface. Its workers are unproductive, infra-
structure spending lags and protectionism remains
Elevated inflation has forced the central bank to
hike rates several times, and the country s credit
rating was cut by Standard & Poor s to one notch
above junk in March.
Brazil s Bovespa stock market index has dropped
more than seven per cent in the past year, falling
faster than emerging market benchmarks.
Enter the World Cup, the world s biggest sporting
event complete with millions of tourists and mega
To capitalise on the spotlight, Brazil is spending
an estimated US$11.5 billion on new stadiums, trans-
portation and airports. Seeking to justify the extrav-
agance, politicians promised that the event would
bring huge economic benefits and improved infra-
Many Brazilians are skeptical about these claims.
Thousands took part in street protests and riots
during last year s Confederations Cup, the top soccer
tournament in the Americas.
Some said they were upset with lavish spending
on sports events at the expense of the social safety
net in a country beset with gross inequality.
Brazilians are right to doubt the economic benefits
of hosting the World Cup, according to a report by
Moody s Investors Service. The credit rating agency
argues that new infrastructure spending associated
with the event is small for the US$2 trillion economy,
and benefits to businesses will be fleeting.
"We see little impact on Brazil considering the
limited duration of the World Cup and the size of
the country s economy," Moody s said.
The event carries potential risks, too. Local
economies are likely to be disrupted, and already
complicated air travel in the country could be affected
as tourists travel between the 12 game sites.
With just weeks to go before the tournament
kicks off, the country has been beset by a series of
strikes as workers demand pay raises and new ben-
"While the World Cup presents a potential rep-
utational benefit, this could be marred if there were
a reprise of the social unrest seen last June during
the Confederations Cup or if needed infrastructure
was not ready," Moody s said.
Sponsors and advertisers such as Anheuser-Busch
InBev and Coca-Cola are likely to benefit most from
the event, the agency said.
Brazil faces a similar situation in 2016, when Rio
de Janeiro hosts the Olympics. Preparations have
already been plagued by delays and allegations of
Elected officials have again sought to bolster their
arguments for holding the Games by predicting big
gains for the host city and country.
But most independent economists say the real
cost of the Olympics is more complicated to deter-
mine; and certainly not as rosy as politicians portray.
nod to the nearby dunes. They settled for
32,000 permanent seats, the additional
10,000 for the Cup installed only temporar-
ily.In February 2011, OAS SA, a São Paulo
builder, took the job.
The federal government, meanwhile,
agreed to finance an airport.
Though an existing airport easily accom-
modates Natal s passenger traffic, local
industry wanted another facility to boost
cargo capacity. The federal government
would invest roughly US$260 million, but
would rely on a contractor to build it and
the state of Rio Grande do Norte, of which
Natal is capital, to lay access roads.
The city, for its part, agreed to improve
traffic and drainage near the stadium. But
the promise of six new tunnels and two
new viaducts stalled.
Locals pressed then-mayor Micarla de
Sousa for results.
"She did absolutely nothing," says Carlos
Eduardo Alves, Natal s current mayor.
De Sousa said she struggled to secure
financing. She also suffered health problems
that led her by early 2012 to announce she
wouldn t seek re-election.
In October 2012, two months before her
term s end, a state court ousted her, alleging
irregularities in city contracts. De Sousa, in
an interview, denied wrongdoing. She says
her removal was orchestrated by opponents
and notes she has yet to be charged with
Regardless, Natal by 2013 had little city
Alves, the incumbent, says he revamped
the plans and finally began US$290 billion
worth of construction early this year. He
says most of the ongoing work will be com-
pleted, or cleaned up, by showtime.
Stadium neighbours, weary of the jack-
hammers, are sceptical.
"Good thing people can t drive to the
games," scoffs Rodrigo Pereira, a shopkeeper
near one of the tunnels, citing FIFA rules
for a large security perimeter around match-
es, forcing attendees to walk. "My customers
can t even reach me."
The state, too, is under fire.
The stadium contract, a partnership with
the builder, obliges the state to reimburse
construction loans and pay management
fees. Over two decades, it is expected to pay
over US$900 million, approximately five
times the job cost.
While most locals say they like the sta-
dium, with its undulating roof, they worry
about the bill. "We have real concerns about
the ultimate price," says Luciano Ramos, an
auditor with a state court reviewing the
The state is also criticised because it is
only now finishing the first of two airport
roads. The airport itself may not be oper-
ational by game time; a tentative launch is
scheduled May 22.
Governor Rosalba Ciarlini blames bureau-
cracy and high personnel costs, an "inher-
itance" from previous administrations that
she says limit the state s ability to invest.
Payroll is so bloated the state pays salaries
late. Some contractors, including suppliers
to hospitals, have quit transacting with the
Controversial herself, Ciarlini faces
impeachment efforts because a state court
earlier this year found she favoured political
allies with pork-barrel spending.
Ciarlini calls the ruling politically moti-
vated. The stadium s cost, she says, will be
offset by revenues from future events, even
though critics say Natal has neither the soc-
cer heft nor the pull on the concert circuit
to guarantee profitability.
The price of the partnership, she says, is
the cost of long-term financing. "This is
like buying a car. You don t pay the sticker
Besides, "we have the prettiest new arena
Local businesses face disruption
From Page 12
A labourer works on areas of infrastructure near the construction site of the Arena das
Dunas stadium in Natal.
The Arena Amazonia stadium in Manaus.
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