The economic impact of the FIFA World Cup 2014 Brazil
In October 2007, the FIFA committee chose Brazil to host the FIFA World Cup 2014. The FIFA World Cup 2014 Brazil took place from June 12 – July 13, 2014 and was the 20th edition of the tournament, in which 32 teams participated and 64 matches were played. Since FIFA invested more than $850 million in the organisation of the FIFA World Cup in Brazil, it will be interesting to carry out an economic impact analysis of the tournament to analyse the event's legacy for the country and its inhabitants.
The generation of economic impacts at destinations is one of the goals of tourism development and can be a strong argument in political and social processes, as well as in creating support for tourism projects. According to Klijs et al. (2012), economic impact in tourism is generally created through visitors who spend money on buying goods and services.
On forehand, the Inspection Report for the 2014 FIFA World Cup (FIFA, 2007) argued that the FIFA World Cup 2014 would stimulate investment in transport and accommodation infrastructure and will bring many outdated football facilities up-to-date. Moreover, the report stated that, in a country with a very strong football culture, the hosting of the FIFA World Cup 2014 might help the member association to improve attendances at football matches (FIFA, 2007). Furthermore, one of the most important reasons to host a FIFA World Cup is the tourist inflow generated by such an event– not only directly, with fans who will watch the games, but also indirectly, as a result of the international media exposure (Ernst & Young Terco, 2011).
An important reason to carry out an economic impact analysis of the FIFA World Cup 2014 is to analyse the legacy of the event for the country and its inhabitants. For the Brazilian government it will be interesting to get insight into the effects of the event on the country in terms of poverty alleviation, the increase of tourism and the return on investments. Since FIFA invested more than $850 million in the organisation of the FIFA World Cup in Brazil (FIFA, 2014), the economic impact analysis will also be interesting for them because it will give an insight in the final output of the event. Furthermore, the economic impact analysis will be interesting for all other FIFA member associations as well, because they will have an insight in what the organisation of the event can bring to a country and, given that the FIFA World Cup takes place every four years, it can affect their reasons to decide whether they will organise the event in the future.
There are three different types of models which can be used to calculate indirect (and induced) impacts: the multiplier model, the Input-Output model (IO model) and the CGE model (Klijs, 2015). The economic impact analysis of the FIFA World Cup 2014 in Brazil will be based on the Input-Output model (IO model), because this model offers potential to be applied in a tourism context (Klijs et al., 2012). Since the IO model was first published by Wassily Leontief in 1965, it has been applied and discussed many times which turned it into a reliable well-known model. The IO model shows that the output of one firm can be the input of another firm, which means that changes in one industry can lead to changes in other industries. An advantage of the IO model is that it is relatively simple and flexible to apply. Only few data is needed to create a detailed analysis of the indirect impacts on output, added value, income and employment in total as well as per sector or visitor category (Klijs et al., 2012). However, the IO model also has some disadvantages. The most important one in case of the FIFA World Cup 2014, is that the model is built on strong assumptions. Although it is not clear if the input is realistic, the change in final demand is based on assumptions, which means that the IO analysis should not be used to predict exact outcomes for a specific event such as the FIFA World Cup (Heijman & Jongenburger, 2011). Moreover, the IO model does not show the distribution of the impacts within the region and the social and environmental effects of the event (Klijs, 2015).
Different types of analysis can be used to analyse the economic impacts of the FIFA World Cup 2014. The ‘significance analysis’ focuses on the effects in a region caused by all expenditure of visitors of an event, zoo, museum, theme park etc. (Klijs, 2017a). In the case of the FIFA World Cup 2014, it will show the total impact of the event. The ‘impact analysis’ focuses on the effects in a region that would not happen without the existence of the event, zoo, museum, theme park etc. (Klijs, 2017a). In the case of the FIFA World Cup 2014, it will show what would not happen if the event did not take place. Since this research focusses on the total impact caused by all expenditure of all FIFA World Cup’s visitors, the most appropriate choice for an analysis of the economic impacts of the FIFA World Cup 2014 would be the significance analysis. According to Stynes (2011) “the significance analysis is seen as a measure of the importance or significance of the project/program (rather than impacts) within the local economy as it shows the size and nature of economic activity associated with recreation/tourism activity in the area.” Therefore, a significance analysis will show the size and nature of economic activity in Brazil caused by the event as well as the total impact of the FIFA World Cup 2014 on the country.
Furthermore, the moment of the analysis is relevant. An ‘ex-ante analysis’ shows the effects of a future change, an ‘ex-post analysis’ shows the effects of a change that has happened (Klijs, 2017a). In the case of the FIFA World Cup 2014, an ex-post analysis would be the best option, because this type of analysis aims to assess the economic effects, including all visitors’ expenditure of the event, after it already have taken place. In that way, the analysis will give an insight in the actual legacy of the FIFA World Cup 2014 in Brazil.
Besides the economic impacts of the FIFA World Cup 2014, there are other impacts that need to be considered, such as social and environmental impacts, impacts on the infrastructure and impacts on marketing and media. According to Ernst & Young Terco (2011), chain reaction effects arising from the FIFA World Cup stimulate and encourage social benefits such as: impacts on the people’s education and income through the Volunteering Program; the country’s exposure in the world media and consequential effects on tourism; potentially reduced violence and crime as a result of investments in security; social benefits from investments in infrastructure; and the microeconomic impacts of the construction and improvement of stadiums and a whole new window of opportunities that is created around them because of the mega event. While the FIFA World Cup 2014 brings important direct and indirect economic and social benefits to the Brazil, its impacts on society and environment are indisputable. In 2013, FIFA published a Sustainability Strategy that “aims at organizing and implementing the 2014 FIFA World Cup in a sustainable manner by reducing the negative and increasing the positive impacts of the event on society and the environment” (FIFA, 2013 p.4). The strategy’s principle was to have a clear understanding of the volume of greenhouse gas (GHG) emissions caused by the event preparation and staging.
Before Brazil was able to host the FIFA World Cup 2014, it needed investments in stadiums, infrastructure and services. Infrastructure includes airports, roads, urban mobility, telecommunications, energy and sanitation. The service sector includes hotels, bars, restaurants, tourism in general and public services such as health, safety, information to tourists, immigration and customs (Ernst & Young Terco, 2011). Furthermore, investments in media, marketing and advertising were needed to be able to host the FIFA World Cup 2014, since the operation of the International Media Centers (IMC) and the International Broadcasting Center (IBC) are crucial for the running of the event (Ernst & Young Terco, 2011).
