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From Latin America: Brazil’s pricy and problematic World Cup preparation - Brian Nicholson

Despite the fanfare, the country is sliding ever deeper into the political and financial difficulties that all too often engulf countries hosting major sporting events.

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Brazil recently celebrated one thousand days until the 2014 FIFA World Cup kick-off with a scintillating display of political footwork that burnished the country’s recent progress, while failing to hide some serious structural problems that hold things back.

There was, of course, the customary fanfare, with political grandstanding and government assurances that everything would be ready on the day. Football legends Pelé and Ronaldo showed up at different – some might say rival – events on 15 September  to inaugurate digital countdown clocks. President Dilma Rousseff visited construction work at a World Cup stadium in Belo Horizonte but skipped a gala dinner with Ricardo Teixeira, president of the Brazilian Football Confederation and the World Cup Local Organising Committee. Relations between the two appear increasingly icy.

First, the good news. Construction or renovation has started at all 12 World Cup stadiums. Nine should be ready by December 2012; the rest a year later. However,the projected total stadium cost has risen substantially to R$6.4 bn, some US$3.7 bn at mid-September rates, with proffered explanations ranging from planning delays, inflation and project upgrades to specification changes by FIFA.

Contrary to initial suggestions by Teixeira and the government, this is virtually all public money, something that’s hardly a surprise for sports analysts who study the experience of previous World Cups.

Lance, Brazil’s leading sports newspaper, marked the thousand-day celebrations by reprinting an editorial from five years ago. Entitled ‘Teixeira is bluffing Brazil’, it warned against believing promises that World Cup stadiums would be privately financed: ‘Teixeira has told anyone who’ll listen that he only wants the government to invest in infrastructure, and that the new stadiums… will be built with private money,’ the paper wrote back in 2006 when Brazil was still a candidate to host the event. Once the country was formally chosen and the government committed to financial guarantees, Lance argued, it would become clear that ‘there will be no investors and the government will have to bankroll the stadiums.’

In October 2007, days before Brazil was officially chosen, Sports Minister Orlando Silva still argued that ‘football stadiums, arenas and competition venues – all this could be done with private investment.’

Fast forward two years, to June of 2009: ‘I have heard that state governments might be interested in building or renovating stadiums,’ Silva said. He remained emphatic that no federal money would be used, but accepted that the federally-run Brazilian Development Bank (BNDES) might lend for this purpose.

Today it’s clear that at least 95 per cent of stadium construction and renovation costs will be public, in the form of federal loans to state governments via the BNDES, state and municipal tax breaks, and direct funding from state coffers. A few stadiums will raise reasonable cash from naming rights and future ticket sales, but the possibility of all the loans being repaid from such revenues looks very slim. Most stadium costs will therefore end up lost within state-level public debt – effectively, put on the credit card.

If Brazil’s stadium investment were fully written off over the 64-match competition, it would average about US$58 million per World Cup match, or around US$1,000 per match spectator. Of course, venues subsequently used by top-line teams could enjoy years of reasonable revenue. But five of the 12 host cities don’t even have first division teams, because World Cup matches were spread around the country for political reasons.

 


A few stadiums will raise reasonable cash from naming rights and future ticket sales, but the possibility of all the loans being repaid from such revenues looks very slim. Most stadium costs will therefore end up lost within state-level public debt – effectively, put on the credit card.


 

The Brazilian Court of Audit (TCU) last year warned that at least four ‘white elephant’ stadiums were unlikely to pay their upkeep after the tournament. A glaring example is Brasília, the federal capital, where a new 70,000-seat arena is being totally financed by the Federal District government. The latest reported cost was R$670 million, some US$390 million. Brasiliense, the city’s top team, last year attracted average crowds of 3,300 and now plays in the third division.

Brushing aside such killjoy accounting quibbles – Brazil is hardly the only country with a tradition of cost over-runs and sticking the bill to the taxpayer – there’s little doubt that Brazil will wow the world with fabulous TV images of colourful stadiums packed with joyous fans. But how those fans will get there is another matter. A government report coinciding with the thousand-day hoopla showed that of the 13 World Cup-related airport upgrading projects, totalling US$3.7 billion, five had yet to start work. Of the 47 planned urban mobility projects, totalling US$7 billion, only nine were under way.

Projects like subway extensions, bus rapid transit systems and traffic improvements have long been touted as the event’s great legacy. But now Planning Minister Miriam Belchior says they aren’t really essential: ‘We can always resolve traffic problems by decreeing public holidays on match days.’

Infrastructure projects have long been plagued by suggestions of political kick-backs, part of the ‘politics as usual’ system that helps ensure government majorities in a Congress with 22 parties. The transport minister resigned under a cloud in July – one of five ministers to fall since January, mainly after allegations of misusing public funds – and Rousseff fired dozens of transportation bureaucrats. While there’s no indication World Cup projects were directly connected, the whole sector suffered uncertainty and delay.

Airport improvements, which Belchior accepted were essential for the Cup, are another sad example of Brazil’s difficulty in modernising public-sector management. Major fields are run by Infraero, an agency dating from the 1964–1985 military dictatorship. Air travel has soared with economic growth and the burgeoning lower middle class, but Infraero has struggled woefully to meet the challenge. Peak-time travel is a nightmare. Long-discussed plans for private investment got off the ground in August with the concession auction of a second-tier airport in the Northeast.

Some airports are building ‘provisional’ terminals because there’s no time for permanent expansion, but the Prosecutor General’s office challenged some expansion contracts, alleging they were improperly awarded without tender. Using an ‘urgency’ justification was inacceptable, it said, since Brazil was selected for the World Cup in 2007.

More political and legal wrangling loomed over the draft General World Cup Law, which Rousseff finally sent to Congress in September. Among the contentious provisions: non-sponsoring TV channels would receive three minutes of match video for news programmes, and anyone over 60 would be allowed to buy match tickets for half price. These respect Brazilian law, but clash with FIFA requirements. Everything indicates that the countdown to the World Cup could be as interesting as the competition itself.

 

For more information on International Bar Association’s Human Rights Institute work in Brazil go to www.tinyurl.com/IBAHRI-Brazil or contact IBAHRI Senior Project Lawyer Alex Wilks at alex.wilks@int-bar.org

 

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Brian Nicholson is a freelance journalist based in Brazil. He can be contacted at brian@minimaxeditora.com.br.

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