Here's how the World Cup will boost Brazil's economy

Alongside roughly 600 others, she has been given permission to sell ice packs and soft drinks outside the Sao Paulo stadium. Onlyofficial FIFA partners are allowed to hock their wares here and within the arena. De Fatima is all too aware that many others haven't been so fortunate.

She recalls the days when as many 22,000 stall-owners plied their trade on Sao Paulo's streets. A mere 600 jobs (although there are also temporary roles in other areas) isn't nearly enough for them, she laments.

"This World Cup is not for the Brazilians," de Fatima replies when asked whether Sao Paulo has experienced the boon she expected. "It is for the foreigners and FIFA friends."

Nationwide protests

De Fatima isn't the only disillusioned Brazilian.

"The World Cup is bringing benefits to Brazil but it's to the economic and political elites -- not to street vendors, not to small companies, entrepreneurs and not to workers in general," she said.

Key to this debate are the spiraling costs of building new stadia across the country to host matches during the World Cup.

Promotional literature released by the Brazilian government puts expenditure in terms of funds, loans and credit lines from the public purse for stadium projects at at $3.5 billion.

But a recent audit suggests the price has escalated to $4.2 billion.

The Maracana stadium in Rio de Janeiro has been redeveloped for Brazil 2014 (CNN)

"The stadiums are not being built for ordinary people because the price of the tickets is very high and many people will not be able to go watch football any more.

A multitude of grievances, not all directly related to the world Cup, have driven this discontent -- including rising transport prices, higher living costs, housing concerns and accusations of police brutality.

Fairness and equality are at the heart of these concerns.

While Brazil has grown rapidly since the turn of the century, creating a new middle class, inequality remains high and some fear the very poorest are being left behind.

"The World Cup reaffirms an existing logic that rules the Brazilian government. It's a logic benefiting big businesses and a small elite who occupy the top of the social pyramid," he added.

Additionally, according to the government, of the million foreign visitors, "95% of them said they intend to return."

"We were saying that we would host the World Cup of World Cups," said President Rousseff in a statement. "Indeed, we staged the World Cup of World Cups.

Not everyone on board

The government's assessment of the World Cup's impact on travel was significantly more enthusiastic than a report last week in theWall Street Journal that called the event "a bust for Brazil's domestic travel industry."

Citing figures from the Brazilian Airline Association, that story projected total air travel in Brazil falling 11% to 15% during the World Cup compared with the same period in 2013. The story blamed hiked-up prices and large crowds for scaring off domestic tourists.

Economists who study the impact of large sporting and other events on local and national economies tend to be less sanguine than the governments that host them.

"Every time you get a World Cup tourist you get one less regular tourist," Dr. Andrew Zimbalist, a sports economist and economics professor at Smith College in Massachusetts, tells CNN.

"Generally speaking, the World Cup does not benefit the host's tourism industry."

Zimbalist says it's doubtful Brazil's international tourism profile will experience long-term positive impact as a result of the World Cup.

We know that many in hospitality take their responsibilities to sustainable development and the communities within which they operate very seriously. We know that globally the tourism industry provides jobs for one in eleven people and that it continues to grow. The International Tourism Partnership works with global hotel chains to make sustainability a cornerstone of that growth, and many of the hotel companies we work with are partners in the Youth Career Initiative (YCI).

YCI works in several countries around the world – including Brazil – to help improve the employment and education opportunities for disadvantaged young people. Working with NGOs to identify young people who want to work but for whom opportunities are limited, YCI partners with hotels in their neighbourhoods which offer them six months of training, mentoring and real-world work experience. 85% of the trainees go on to employment or further education.

The Brazilian government has also recognised the role that the hospitality industry can play in providing employment opportunities for its citizens. It created PRONATEC – a National Programme for Access to Technical Education and Employment.

A partnership between the Ministries of Tourism and Education, the programme is one of the crucial actions the government has taken to prepare Brazil for the big events that the country is hosting. The aim is to give employees the skills to provide a high quality and competent service for visitors in order to strengthen the country’s image as an ideal tourist destination.

The Ministries took Pronatec to the tourism sector where the programme will help those already working in tourism as well as those who wish to qualify in the industry. A range of training activities linked to incoming tourism, in addition to courses in English, Spanish and Braille, are offered and participants will also receive student aid, food and travel assistance.

More than 166,000 people enrolled on the programme. Additionally taxi drivers, tour agents, civil and military police, city police and fire departments are all being trained to welcome visitors during the World Cup.

Brazil’s projected budget for hosting the World Cup is $13.3 billion and $18 billion for the Olympics (not counting the projected amount of public and private investment that will be needed before). The problem is that based on recent games, the World Cup generates approximately $3.5 billion in revenue (with most going to FIFA) and the Summer Olympics generate around $5 billion (with most going to the IOC).1 Simple arithmetic says that the games will be net losers for the host country

unless the host makes up the difference with increased income from tourism and investment during the games or—as a result of the games—in the future. The other way to make up for the cost is if the physical legacy from the games (sports venues and infrastructure) can be turned around to produce a future stream of benefits.

The prospects are not bright. Consider the following.

First, in Brazil’s roaring economy, the kind of capital investment that is being demanded for the games risks both inflation and low-quality construction. Economic stimulus spending can be helpful to an economy with high unemployment and excess capacity. In such circumstances, expansionary fiscal policy can indeed create jobs, lift demand for goods and services, and promote economic growth. Brazil’s economy, however, is experiencing strong economic growth (7.5 percent in 2010) and record low unemployment (around 6 percent in April 2011). When governments undertake major, long-term infrastructure investment programs under these conditions, economic theory warns of overheating the economy. This appears to be what Brazil is experiencing with rising inflation, currently at over 6 percent per year (despite tight monetary policy). There is so much building going on that construction workers are fully employed. According to one recent report, 80 percent of São Paulo’s construction projects are being delayed because there aren’t enough qualified workers to proceed. When large capital projects, such as those for the World Cup and Olympics, are under severe time pressure, it forces construction to go forward without a properly skilled work force,auguring potential problems down the road in the form of shoddy work, low-quality materials and wage inflation.

And project costs inevitably balloon.

Third, there is the issue of physical legacy and white elephants. Land is scarce and will only grow scarcer over time. With each sports facility taking up 15 to 20 acres of urban real estate, that land will not be available for other, perhaps more productive, use for several decades. Think of Beijing’s Bird’s Nest, Water Cube or Velodrome—all beautiful monuments to the sporting events they hosted, but now largely unused—and with hefty maintenance costs.

Getting to Work

For now, though, the biggest concern for Brazil is beginning and finishing the myriad construction projects that were part of its World Cup and Olympics bid proposals. The obstacles are severe: they include labor shortages, bureaucratic encumbrances, political corruption, legal entrapments, insufficient funds, incompetence, and inadequate infrastructure.

In 2010, the number of overseas visitors to the country totalled 5.2 million, according to the United Nations World Tourism Organisation.

This meant that Brazil did not even feature in the global top 10, and it was dwarfed by world number one France, 76.8 million, and number two, the US, 60 million.

There are numerous reasons why Brazil remains off the main holiday map, but perhaps the biggest two are the fact it is rather a long way from Europe and the US, and a perception of high crime levels.

Flavio Dino, the president of Embratur, the Brazilian Tourist Board, told the BBC Business website that running a successful 2014 World Cup, and 2016 summer Olympics in Rio, will help to more than double the number of people visiting the country by 2020.

Brazil World Cup 2014: Tickets go on sale

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Tickets for the 2014 World Cup in Brazil went on sale on Tuesday, with fans able to apply on Fifa's website.

Fifa is expecting a similar demand to Germany 2006, when there were about seven applicants for every ticket of the 64-match tournament.

Around 3.3 million tickets will be available for the tournament.

Tickets will range in price from £58 (US $90) for first-round matches to £632 ($990) for the final at Maracana Stadium in Rio de Janeiro.

Brazilian citizens over 60, local students and members of some social programs can purchase tickets for £15 ($23).

The Price of Football - World Cup 2014

Ticket: £58-£112

Final ticket: £281-£632

Hotel: £146-£797 per night

McDonald's meal: £11

Average dinner: £29

T-shirt: £13

Sun cream: £9.50

Water: £1.28

Imported beer: £3.83

Domestic beer: £1.91

Coffee: £2.55

UK packages range from £2,999 to £14,999

Figures compiled by BBC World Service

"It's always difficult to predict," said Fifa marketing director Thierry Weil. "But I truly believe that it will be more toward to what happened in Germany than in South Africa in 2010."

According to Fifa, the 2006 World Cup was attended by more than 3.3 million fans. Almost two million tickets were sold to the general public in South Africa, although the number of applications during the first ticketing phase was significantly lower.

All applications made before 10 October 2013 will enter a random selection draw if there are not enough tickets available to fulfil all requests.

The sales of the leftover tickets will begin on 5 November on a first-come, first-served basis. Another phase will begin on 8 December after the draw is made.

The tournament begins on 12 June, with Brazil playing the opener in Sao Paulo.

BBC World Service carried out a study, called the Price of Football - World Cup 2014, which looked at the ticket prices and the cost of travelling to Brazil. It found that English fans face hotel costs of between £46 and £797 a night, while packages range from £2,999 to £14,999.

The 2013 BBC Price of Football study, looking at the cost of following 166 clubs across the 10 divisions of English and Scottish football, will be published on Thursday, 12 September.

3. WORLD CUP CONTROVERSIES

3.1 FIFA’s tax exemption

Any direct or indirect expenses incurred by FIFA for the 2014 World Cup were granted full federal tax exemptions by Law Project 7422/2010, which was submitted to the National Congress on May 31, 2010. These expenses include imports carried out by FIFA itself, its Brazilian subsidiaries or any third-party organizations hired by or associated with FIFA to help organize the event.[xix]Provisional Measure 497/2010 described a special tax regime for the construction of stadiums for the 2014 tournament and the FIFA Confederations Cup 2013 (da Silva, 2010b).[xx]

The exemptions detailed in Law Project 7422/2010 included, but were not restricted to, federal excise taxes due on customs clearance (IPI), import taxes, freight taxes (AFRMM), Contributions for the Financing of Social Security (COFINS) and fees for the use of the Foreign Trade system (SISCOMEX). Furthermore, they applied to the imports of a wide range of durable goods and consumables that would be used exclusively during the tournament.

Law Project 7422/2010 is also discriminatory in assigning the burden of tax payments to suppliers involved in the organization of the tournament. Again, it favors FIFA and its interests. Being a non-resident entity, FIFA receives exemptions from taxes levied on its own activities in connection with the World Cup, whereas its businesses that are registered in Brazil do not receive such benefits.[xxi]Crucially, the law highlights that Brazilian suppliers, both individual and corporate, who receive payments from FIFA and its affiliates will not be exempt from taxation on income and capital gains. However, FIFA’s Brazilian subsidiaries are granted the same exemptions from corporate income taxes.[xxii]

This indicates the shifting of the burden of income tax payments from FIFA to Brazilian companies not permanently associated with the footballing institution. Most of FIFA’s other operating and organizational expenses, such as compensation and prizes, also escape taxation, whereas income of Brazil-based sources continues to face taxation.[xxiii]

According to Brazil’s Federal Revenue Department (FRD) 2010 estimates, the tax breaks associated with the 2014 FIFA World Cup and the 2013 FIFA Confederations Cup total around R$800 million (US$475 million) between 2011 and 2015.[xxiv] It seems that while the temporary tax breaks limit costs for FIFA and its private suppliers, they also serve to limit potential tax revenue for the Brazilian government. This shortfall in tax revenue most likely translates to an increase in the burden of future taxation for the country’s citizens.

4. SUMMARY

The broad ethical concerns are summarized below.

4.1 The Brazilian government decided to host the 2014 FIFA World Cup despite the country’s clearly apparent lack of infrastructural capacity, poor operational management capabilities and ill-suited private and corporate business environment.

4.2 The government has repeatedly neglected the requirements of society and its demands for improved healthcare, education and public infrastructure. Instead it has served to benefit FIFA, a private foreign institution, at its own cost and the cost of its citizens.

4.3 Relaxed tax requirements and numerous exemptions offered to FIFA have robbed the government of tax revenues and increased the future tax burden on the Brazilian public.

4.4 The government has not delivered on several secondary infrastructure projects that it promised, such as modernization of airports and urban and interstate transportation facilities. These projects would have brought real value to society by directly benefiting the Brazilian public. However, the government sanctioned and financed the construction of expensive stadiums that will most likely not deliver returns on investment.

4.5 The organization of the tournament came at the direct expense of the welfare of Brazilian citizens. Local housing facilities such as favelas were evacuated, and appropriate relocation measures were not enacted across the board.

5.2.1 Tourism

It is estimated the 2014 FIFA World Cup brought approximately 3.7 million people to the country from around the world. Tourists were expected to inject approximately US$3.03 billion into the Brazilian economy[lix] through expenditure on accommodation, food, transportation and entertainment. Of course, expenditure on match tickets could not be considered, since FIFA receives all revenue from ticket sales. In addition to these direct effects on the Brazilian economy, this money could also have indirect impacts through the phenomenon of multiplier effects, i.e. the recirculation of the foreign money within the Brazilian economy in the form of local consumption.

England fans hoping to head to Brazil for the World Cup can rest assured that there will be affordable accommodation available - but it may be a love motel or a hotel in a slum.

Prices in the key cities hosting World Cup games have soared, particularly in Rio de Janeiro, which will host the final on July 13, but will also be used as a base by many fans travelling to watch the competition.

And as tourists have been priced out of hotel, they have turned to more unusual options, including hastily-built hotels in the city's favelas, or slums, and even love motels, where locals keen to avoid the prying eyes of parents or spouses visit for privacy.

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Under construction: A shortage of hotel beds in Rio has led to demand for alternative housing around the city and many tourists will opt to stay in some of Rio's slums in order to save money

'It was ridiculous, said Raphael Ruland, a German fan who has also attended the last two World Cups.

Priced out of a traditional hotel, he eventually found a room after months of haggling on apartment rental site Airbnb.

'Some hosts were charging four or five times their normal rate. There was a time when I thought it wouldn't be worth going, just because of how much accommodations cost.'

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Authentic experience: Shanty towns are hurriedly constructing more rooms to house tourists and offer them an alternative view of the city

Fans that haven't yet booked face prices upwards of £415 a night for the few rooms remaining. There are, however, some alternatives.

Traditional Brazilian love motels usually charge for stays of four or six hours but some are cashing in on the Wrold Cup and offering daily rates to visitors.

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Unusual accommodation: Love motels, such as Shalimar, which has poles in its bedrooms, are offering overnight rates to tourists who are struggling to find accommodation elsewhere

While love motels are famed for their eccentric additions, such as rotating circular beds and mirrored walls, some have toned down the decor for this summer's competition in a bid to attract more guests.

One rather more colourful love motel, named Malaga, is offering rooms over the weekend of the Cup final from £119 per night.

Another more affordable option is a stay in one of Rio's hillside slums, known as favelas, although some have struggled with a surge in violent crime in recent months.

Favela accommodation has become a growing trend in recent years as the area have become safer and tourists have looked for a more authentic experience - especially with many favelas boasting the best sea views in the city. But even slum hotels have escaped the price increase.

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Stylish escape: The terrace of the Mirante do Arvrao hotel in the Vidigal slum shows that favela accommodation can be just as nice as hotels on the beach, but with a lower price tag

One room in a guesthouse overlooking the beach usually goes for £14 a night, though that rate has jumped to £82 during the World Cup.

'I think a lot of people who wouldn't have considered this normally are considering it for the World Cup,' said Elliot Rosenberg, an American who runs Favela Experience, which lines up room and home rentals for travelers in favelas. 'The high prices have forced them to look at alternatives.'

That even includes tents. One group of British expatriates set up a campsite near a beach outside the city center, and it's already 75 per cent booked for the first half of the tournament.

Brazil's hotel industry has suffered from low investment in recent years as developers opted for more lucrative office and residential projects.

How much will it cost? A study by University of Sao Paulo estimated the infrastructure outlays in Brazil ahead of the 2014 World Cup to be roughly USD 18bn, with USD 14bn coming from Brazilian taxpayers’ pockets. The expected outlays devoted to hosting the Olympics are an additional USD 15bn, resulting in a total outlay of USD 33bn for both sport events. This is large compared to other recent Olympics spending, as chart 2 shows.

But there will, of course, be benefits. Brazil’s Ministry of Sports – not exactly an independent source – claims 120,000 jobs will be created pr. year by the preparations for the two big sports events. Which is not bad!

Extracting a few more figures: according to a survey conducted by University of Sao Paulo, the overall gross economic impact of 2016 Olympics is expected to be USD 51.1bn. Furthermore, according to a study by Ernst & Young, the overall impact of the 2014 World Cup impact is expected to be USD 70bn from both direct and indirect investments. That is a total of more than USD 120bn in gross economic impact from hosting the two events.

(Photo: Marcelo Sayao, epa)

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GENEVA (AP) — The 2014 World Cup is the most valuable, lucrative and expensive in FIFA history.

Record numbers include a $35 million prize to the winning team's federation, $4 billion commercial revenue for FIFA and a $14 billion bill for Brazil.

With 3 million tickets available to buy, the 64-match tournament is almost sold out.

"The financial success — we have it, it is done," FIFA secretary general Jerome Valcke has said. "The ticket sales success is there, we have never sold so many tickets."

FIFA's satisfaction is not shared across Brazil.

Taxpayers are picking up the biggest bill, with the country of 200 million people running up costs several times more than FIFA to stage the world's most-watched sports event.

The $14 billion total is the predicted spending on building and renovating 12 stadiums, upgrading federal, state and city infrastructure, plus security plans to welcome the 32 teams and around 600,000 expected visitors.

The spending fueled unrest in Brazil, especially during the Confederations Cup last June, among those wanting better schools, hospitals and less government corruption.

"When Brazil bid for the World Cup they had the budget to do so," Valcke said.

FIFA forecasts it will spend $2 billion on the 2014 tournament, including the local organizing committee costs.

Still, much of that bypasses Brazil. Even if the host nation does earn the winner's check on July 13, the remaining $323 million in FIFA's prize fund goes to the other 31 nations.

The federations also share $48 million from FIFA to prepare for the tournament, and $70 million goes to (mostly European) clubs whose players are selected.

The $35 million first prize is less than 1% of the governing body's revenue banked directly from its marquee event over a four-year commercial cycle.

Broadcasters and sponsors pay most of FIFA's $4 billion income.

European television networks have paid the majority of the nearly $1.7 billion, so far, in rights fees to FIFA, according to the past three years of financial reports.

Six top-tier partners — Adidas, Coca-Cola, Emirates, Hyundai, Sony, Visa — pay a combined $177.125 million annually. That totals $708.5 million over four years.

Eight second-tier sponsors — Budweiser, Castrol, Continental, Johnson & Johnson, McDonald's, Moy Park, Oi, Yingli — collectively pay $524 million. About $120 million has been earned from Brazilian 'national sponsors,' according to the 2011-13 financial reports.

FIFA also gets hundreds of millions from fans buying match tickets, plus agencies securing the rights to sell corporate hospitality seats, and licensed merchandise.

As street protesters in Brazil know, FIFA's revenue is untaxed there. World Cup sponsors and media also receive exemptions for their operations as a condition of Brazil's hosting bid in 2007.

FIFA, however, has spent significantly in Brazil.

FIFA already gave $221.6 million to the embattled organizing committee, and more should follow in last-minute wrangling over paying for essential services.

In February, FIFA settled a nearly $20 million bill for power generators needed for broadcast operations.

"We stepped in because it's not a question just of money," Valcke said then. "We were afraid that we would not be on time to deliver this energy. And without it, we cannot broadcast the World Cup."

FIFA's investments include tens of millions for TV production to deliver the biggest ratings this year.

In 2010, the Spain-Netherlands final was watched by 530.9 million people according to the reliable "average global in-home audience" measure. More than 900 million people watched at least one minute of the match at home, and the overall total likely topped 1 billion when public viewing places are added.

Spending by FIFA on ticketing, accommodation and IT services has also helped Brazil's economy. Draw ceremonies for the qualifying groups in Rio de Janeiro in July 2011 and the finals tournament in Costa do Sauipe last December added several millions more.

The full World Cup financial picture will be clear only next March, when FIFA publishes its 2014 accounts.

Typically, its numbers peak in a World Cup year.

Its reserves are $1.4 billion, which are intended to keep the Zurich-based body operating and organizing its other tournaments — including the Women's World Cup, under-17 and under-20 events, Summer Olympics, Club World Cup — if its main attraction is canceled.

FIFA reinvests about 75% of its income in soccer, including $250,000 annual grants to each of the 209 member federations. The six continental bodies get $2.5 million each, and $27 million was spent in 2013 on development projects, such as pitches and training centers.

That $27 million was exceeded by paying $36.3 million in executive bonuses, and the total personnel bill was $102 million for about 450 staff members.

FIFA can certainly afford the current and future expenses.

Booming sales for the next two World Cups to broadcasters Fox and Al-Jazeera, among others, and renewed deals with long-term commercial partners Adidas and Coca-Cola should ensure that $5 billion flows into FIFA for the 2018 tournament in Russia.