MARKET FOCUS
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Balance sheet
With this summer’sWorld Cup and
the Olympics in 2016, Brazil is set for a period of intense
media attention. But with economic cracks already
showing, will the sporting showpieces be enough to
revive the fortunes of the South American BRIC giant?
nals could be disrupted by more economic
and social protests, egged on by the fact that
the eyes of the world will be on Brazil during
the summer. However,most commentators
think that a sense of national pride, coupled
with robust security, will keep most Brazilians
away from the barricades.
Rousse ’s popularity, which plummeted
during last year’s protests, has largely
recovered and few are betting against her
chances of re-election in September.While far
from sound, the Brazilian economy is
supported by a strong banking system and
considerable foreign reserves, and is nowhere
near as fragile as, say,Argentina’s orTurkey’s.
But the feelgood factor that comes with full
employment may be about to fade.The
majority of the past decade’s growth has come
from rising employment rather than rising
productivity, and jobs and wages growth is
slowing right down. In ation is heading
upwards. Public spending, already nearly 40%
of GDP, is stretched to its limits, so the scope
for papering over the cracks is increasingly
curtailed. Credit growth, too, is slowing.There
are fears that the three-monthWorld Cup
season – a month of anticipation, another for
the event itself and a third of post-tournament
celebration or misery – will actually depress
growth,much as large international sporting
events have done elsewhere.
Brazil has won theWorld Cup more times
than any other nation and, on home turf, it may
well do so again. But the sense of carnival that
has accompanied its economic progress may
now be a thing of the past.The Economist
Intelligence Unit predicts that, assuming a
stronger world economy, Brazil’s average
yearly growth from 2015 to 2018 will be
marginally higher at 3.2%.That’s respectable
enough in the developed world but, for an
emerging market, it won’t win any trophies.
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2 Economic Intelligence Unit estimate
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PAYING THE PENALTY
South Africa’s 2010World Cup proved to be a
successful event, both for visitors and South Africans
themselves.Yet when the last vuvuzela blast died
away, the country found it had recouped even less of
the costs than it had hoped.
South Africa spent some £3 billion on infrastructure
and stadia, according to reported official figures.The
largest single category of expenditure was transport,
which included a new train network, the Gautrain,
linking Johannesburg, Pretoria and O. R.Tambo
International Airport.That was closely followed by the
cost of new and upgraded stadium facilities.
Against its outlay, the government had hoped to
recover £570 million from the tourists it hoped would
attend. Of the expected 450,000 visitors, however,
a little over 300,000 turned up. So the eventual
boost to the economy was calculated to be just
£320 million. FIFA, on the other hand, reported that
it made a £382 million profit from the tournament.
The football clearly had a distracting effect on
productivity. South African annualised GDP growth
fell from 4.6% in the first quarter of 2010 to 3.2%
in the second to 2.6% in the third – the periods
covering the build-up and the tournament itself.
Business also failed to reap the benefits it was
expecting.According to KPMG, 45% of its largest
African clients had looked forward to a boost from
the event.Afterwards, however, only 22% said they
had actually benefited.
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