Business Opportunities Created by 2014 World Cup to Brazil
Table of Contents
FIFA World Cup is the biggest and the most aired sporting event in the world. It is publicized and promoted throughout the media as companies try to build their brands soccer. Its viewership over the television media is estimated to be over a billion. All forms of businesses ranging from manufacturing and even services are involved in the event as they try to strengthen their brands, as significant number of the largest brands in the world is built around soccer. On the other hand, countries that have been awarded the opportunity to host this grand soccer event switch into a mode of preparation in order to make it a success. In addition, there are many opportunities that accrue from a country being awarded this opportunity. For instance, the country gets an opportunity to host a large number of soccer fans, players and officials: all consumes hospitality, entertainment, among other services. Countries also benefit from branding of cities including their infrastructure and tourist attractions through the extensive media coverage. Award of FIFA World Cup to Brazil brought numerous business opportunities. These came as a result of large infrastructure projects meant to ease transport and communication as well as increase collaboration between the local and international firms in order to promote and support the event. This paper will explore business opportunities generated by the award of the 2014 FIFA world cap to Brazil (Mattos, 2014). It will also discuss the cost at which these opportunities come.
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The award of the FIFA World Cup to Brazil for the year 2014 was another opportunity to extend and accelerate the economic boom which begun in 1994 (Brazil 2014, 2013). This was an opportunity for the country to elevate its status from that of an emerging market into a developed status. For instance, the announcement that the country had been awarded this opportunity prompted the government to source for $1 trillion all of which were directed into public works. This became an opportunity to jumpstart the renovation and construction of a dozen of stadia as well as a large refurbishment of the national transport infrastructure. Creation of bigger road was aimed specifically at the development of rapid transit train to run between Sao Paulo and Rio with weight being put on the four lines running from the airport to the downtown Rio. The mega infrastructure project also included construction of ports, expansion of 12 airports and establishment of a hydroelectric plant, and transmission lines to power this large infrastructure project.
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Although it is relatively lengthy to relate these business opportunities, it is estimated that the project created around 70000 jobs its peak, several service industries along the construction sites for the workers (Avsar & Unal, 2014). This made the whole project to be economic stimulus, and the largest the country has seen for the last decade. According to Avsar & Unal (2014), this was a crucial mean of providing capital to these workers as would- be- entrepreneurs after the construction projects were over. It is important to note that these projects were made to ease and make transform efficient. This created a major boost to the existing businesses but more importantly, it led to the creation of new ones. During the main event, many businesses were started to provide services to large number of guests and tourists. The event and the preparation processes increased the trading opportunities available for various people.
There are myriad of other business opportunities that are directly associated with the event. First was the ticket sales management. Many firms offered this service including the online sale of the same. At the same time, a large number of memorabilia of varying types were needed by the government, private firms, various businesses and individuals to mark this event. The services were required in many cities’ hotels, streets and private residences in forms of statues, curios, murals, paintings and virtual forms in the Internet. Another great opportunity that was brought by the award of this football event was in property and hotel business. It was clear that the event would lead to influx of fans and tourists in their tens of thousands. The event, which was above a month in length, came up with an opportunity to provide hospitality services to all fans. As a result, property and hotels were built in around cities where games would be hosted. This provided the largest opportunity for entrepreneurs and investors to cash in the mega event.
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Millions of fans that came with the FIFA World Cup offered a great opportunity for people wishing to temporarily or permanently invest in hospitality sector as soccer event would last for over thirty days (Mattos, 2014). Tourists, fans, players and officials would need to be provided with meals, accommodation and entertainment. Therefore, the recipients of these services would pay millions to the providers which would pay for investments into the business and provide enough funds to diversify ones the event is over. The event would also create a good opportunity for entrepreneurs and businesses in entertainment sector to earn. At the same time, the number of people needing these services would be simply overwhelming with businesses that are already in the market. This would provide another opportunity for new businesses and individuals to venture into entertainment business for the swollen number of tourists. The whole preparation process became a major mover to the Brazilian economy. The infrastructural construction projects, food and beverage as a support industry for the construction process, several aids to trade in preparation and support of the main event including IT, utilities and tourism over the period is recorded to have generated 3.63 million jobs through direct employment as well as creation of enterprises (EA Sports (Firm) & Fédération internationale de football association, 2014).
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The overall effect of preparation and the hosting of the actual event will leave the country with much better infrastructure, more beautified cities, some with memorabilia as well as improved stadia. Traditionally, Brazil has been a famous tourist destination in the South American continent; moreover, all the above developments will raise the competitiveness of this country as a tourist destination during and after the World Cup event, and many tourists from all over the world got interested in touring Brazil. This will offer many business opportunities to the country in post FIFA World Cup period. The improved status of cities and stadia will also boost the sporting experiences for the local soccer. At the same time, many Brazilians will have an opportunity to visit their own renewed country, and sample their new and improved infrastructure, the beautified streets among others. This will create many opportunities for the hospitality/catering industry for continued sustainability of structures set up to support FIFA World Cup creation of enterprises (EA Sports (Firm) & Fédération internationale de football association, 2014).
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Only 1% of Brazilian exports are produced by small firms, the case has been caused by poor transport infrastructure as well as reduced external investment into the Brazilian small and medium enterprises; this also the case with manufacturing and processing industry (UK Trade & Investment, 2011). Development and innovations brought by the award of World Cup especially in infrastructure will create more opportunities for small firms to engage more creatively in production due to the increased efficiency in transportation. At the same time, several hydro electrical power stations, which have been established to run the new transportation infrastructure, will be utilized in production. Increased energy will lower per unit cost making production cheaper.
Another great opportunity that Brazil gained from the award of FIFA World Cup was media attention. It is for a reason that it is the greatest sporting event, thus, the world pays all the attention to the event and the host nation. All the famous media houses in the entire world extensively cover the event, and the host country usually at no extra cost to the hosts. A lot of information about the country is revealed. Hence, this is a great opportunity for the host country to brand itself by coming to the global arena. The richness, diversity, vibrancies and sophistication of Brazil was covered extensively. This would inspire the external investors to consider various business and investment opportunities available in Brazil, and go on to exploit them.
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The Cost of These Opportunities
On the other hand, some analysts and critics have raised concerns over the cost at which the above opportunities will come at (Awetí & Sebastian, 2002). This is bearing in mind that Brazil is a developing country and preparations/hosting of a large event becomes different than it would be for a developed country. According to Hunter (2013), there are usually very high expectations and emotions surrounding FIFA World Cup. However, some of these expectations remain unmet after the event was concluded. The available data shows that there were no significant economic gains that accrue from hosting World Cup (Hunter, 2013). Studies on the FIFA World Cup 2006 held in Germany informed that the country did not experience any significant increase in employment rate. The only noticeable economic gain that was experienced during that period was increase in tourism arrivals where the number of overnight guest in the sporting period reached 72 million (Avsar & Unal, 2013). The event had little financial gains but Germans reported that it only elevated their happiness. In the World Cup 2002 held jointly by South Korea and Japan, Japan only experienced expansion of GDP by 4.3% in one quarter which was followed by contraction in the economy in the subsequent quarters. This shows that even the developed countries do not make much from the sporting event. The only difference is that hosting of this event for these countries is more of a private affair meaning that the taxpayers will not be burdened with the preparations and the actual hosting (Ho, 2001). At the same time, the opportunity cost for hosting such an event in developed world is more in the favour than against.
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There were several World Cup events that were recorded as an economic success in the host countries. The 1990 FIFA World Cup in Italy, the country benefited from renovation of stadia and city infrastructure which included the historic roofing of Olympic stadium. Therefore, the whole preparations led to an expansion of the GDP by 3.4% in the year 1989 (Samuel, 2001). The newly constructed stadia revamped football and lead to renewed investor confidence in the game helping to nurture talents and maintain the stadia. In this case, the event was not a taxpayers’ burden. In the 1994 World Cup in the USA, the same scenario is seen where private investors were in the centre stage in preparation and hosting of the event. Afterwards, investors took concerted efforts to popularize football and maintain the stadia. Of the prominent investor was Rose Bowl Pasadena (Samuel, 2001).
The case is different for the developing countries as the whole preparation is to a significant extent footed by taxpayers (Samuel, 2001). In this case, the government’s choice to expend such amount of money, for example a billion of dollars for Brazilian case raises many questions. It is for a reason that the large structures developed –using scarce resources- in preparation may end only having marginal utility after the event is completed. The city innovations, construction of hotels and refurbishment of stadia in Jo’burg, Durban and Cape Town are left underutilized after the FIFA World Cup 2010 (Hunter, 2013). The sports industry is not adequate to maintain these structures. Additionally, the number of tourists visiting this South Africa is less than adequate to sustain structures and services that were meant for football fans, players and officials. It is important to note that this capital could have been used in other developmental projects than turning them into capital that will only have marginal utility. Additionally, the cost of capital for developing countries is very high compared to the developed countries. At the same time, soccer fans tend to be attracted more to developed hosts than developing ones reducing the revenue generated by the developing countries during the event. In 2002, Japanese stadia were 89% occupied compared to South Korean that were 74% occupied the reason being that Japanese GDP was 80% larger than the South Korean (Hunter, 2013).
As the above concerns are true, the opportunities brought by the FIFA World Cup award to Brazil needs to be utilized very well. Since the government has used taxpayers’ fund, it has to carry out more steps to ensure that the infrastructure and the stadia developed can be managed well. However, this can be easier as soccer is already a popular sport in Brazil. The government also needs to formulate other stimulus to keep all the businesses begun during the event running. Additionally, more private investors are needed to invest in soccer so that stadia can be effectively maintained. Brazil has the capability to escape the predicament that South Africa found itself in after the World Cup as it is a more advanced economy (Mattos, 2014). For this reason, it can be in a better position. Brazil has an advantage in that it will be preparing for Summer Olympic 2016. This will keep the economy vibrant after the stimulating effect of the World Cup preparation.
In conclusion, the award of World Cup 2014 has brought along business opportunities for Brazilians. The process of preparation for this event was an economic stimulus, and led to creation of 3.63 million employment opportunities. The infrastructure and stadia development alone provided 70000 people with work places. Additionally, service businesses were set up to cater for the tourist during the World Cup. Despite the earlier history of World Cup events and the particular complexity brought about by Brazil as a developing economy, Brazil can still take advantage of the opportunities that presented themselves in this award. The economy can be kept running by anticipation for Summer Olympics 2016. The FIFA World Cup event has already made the Brazilin economy the seventh largest in the world (McDermott & Fédération internationale de football association, 2014). Analysts argue that this was what Brazil needed to transform from an emerging market to a developed economy. The business friendly environment created by the development of transport infrastructure, the lower cost of utilities such as power in some places and the capital that occurred as employment opportunities in preparation for the FIFA World Cup event are sufficient to foster development of many enterprises. The media attention brought by this event will attract foreign investors to boost trade and investment.
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The media attention brought by the World Cup exposes the investment and business opportunities for foreigners and the locals. Additionally, it will trigger influx of tourists which creates demand for services. The increase in tourism can be more important for Brazil which is a traditional tourist destination. Additionally, it is a diverse country with unique culture, breath taking sceneries and a considerably high level of human development. Finally, a country that has been experiencing a continuous economic boom sine 1994 can be interesting is likely to be boosted by hosting two global events in a span of 2 years.