Who Is the Cup For? Expenses in the World Cup 2014

Who Is the Cup For? Expenses in the World Cup 2014

Graffitti spotted at São Paulo's 8th "Não Vai Ter Copa" World Cup Protest, May 24, 2014
Graffitti spotted at São Paulo's 8th "Não Vai Ter Copa" World Cup Protest, May 24, 2014 — Image Credits

Introduction

Fifty years after the historic 1950 World Cup, Brazil will again host the greatest event in soccer. It should be a time of joy for Brazilians, a unique opportunity to celebrate one of its greatest national passions. Even as the population prepares to cheer the national team while aiming for a hexa (a sixth World Cup championship), discontentment about hosting the Cup in the country is growing every day. A survey released in February 2014 showed that if the choice of hosting the World Cup were offered to Brazilians today, only 26.1 percent would support it. In addition, 75.8 percent of respondents said that investments in the country to carry out the World Cup are unnecessary, and 80.2 percent said they disagree with investments to construct stadiums and that public resources could have been invested to improve other important areas of the economy.[1]

The objective of this paper is to show where investment money for the World Cup comes from and where it is going. For the well-informed reader, it is not news that it comes from public funds and flows into private pockets. In Brazil this is not an exception to the rule during the World Cup but rather a common phenomenon. FIFA is merely exploiting an endemic characteristic of the Brazilian state, that is, the creation of policies that only benefit a small portion of the population – the wealthiest portion, which needs it the least.

How much will the World Cup cost?

One question that concerns many Brazilians is about the true cost of the 2014 World Cup. The World Cup in Japan and Korea (2002) cost €4.6 billion, in Germany (2006) €3.7 billion, and in South Africa (2010) US$3.5 billion. How much will the World Cup in Brazil cost?

In 2007, the economist Carlos Langoni, former president of the Central Bank and then finance director of the Cup Local Organizing Committee, carried out a study estimating the cost at US$6 billion, which at the time amounted to R$10.6 billion.[2] This already would make the World Cup in Brazil the most expensive ever, but it did not stop there. In January 2010, the Sports Ministry estimated the total expenses of the Cup to be R$20.1 billion.[3] Since then, the federal government has been publishing the Responsibility Matrix of the Cup, which contains all estimated expenses.

1. The Responsibility Matrix

The Responsibility Matrix is the official government document that shows the values to be invested in the 2014 World Cup. The latest version of the Matrix is dated September 2013 and forecasts a total investment of more than R$25 billion divided into nine areas: urban mobility;  infrastructure works in stadium surroundings; construction and renovation of stadiums; airports; ports; telecommunications; security; tourism; and complementary facilities. In the Matrix it is also possible to see the source of funds for the projects.
 

World Cup Responsibility Matrix – September 2013 (in million R$)
  Federal funding Federal Investment Local Goverment Investment Private Investment Global Investment
Urban mobility 4,315.80 - 2,711.67 - 7,027.47
Infrastructure in the surroundings 62.10 17.63 916.79 - 996.52
Stadiums 3,919.80 - 3,952.15 133.25 8,005.20
Airports - 2,662.76 - 3,617.80 6,280.56
Ports - 581.00 6.30 - 587.30
Telecommunications - 404.00 - - 404.00
Security - 1,879.10 - - 1,879.10
Tourism - 162.75 17.53 - 180.28
Complimentary Installatiions - - 208.80 - 208.80
Consolidated Matrix 8,297.70 5,707.24 7,813.24 3,751.05 25,569.23
Source: Responsability Matrix 9/2013







These investments had already been made a few years ago, but most were left to the last minute, which increases the risks for workers and offers the opportunity for "emergency" contracts, whereby normal bids are waived. In the World Cup Transparency Portal, which has more updated data, it is possible to monitor the financial execution of the infrastructure work. In March 2014, a few months before the World Cup, 89.8 percent of the work had already been contracted out, but only 51.2 percent had been paid for. Therefore, in the first half of 2014, governments will have to increase payments if they want the work to be ready on time. All indications are that this will be accompanied by spending cuts in other areas, such as health and education.

Other data that appears in the Matrix is the distribution of investments by host city – it is obvious that investments are unfairly distributed. Of the 12 cities, São Paulo, Rio de Janeiro, and Belo Horizonte account for almost half of all spending. Looking at investments per area, the concentration is even greater.

2. Expenses with stadiums

Not only have the estimated values of the investments changed from the initial estimates, but also the sources of the funds. In 2007, at a ceremony that formalized the support of Brazilian President Lula da Silva in bidding for the World Cup, former president of the Brazilian Football Confederation (CBF) Ricardo Teixeira said: "The World Cup is a private event. The best characteristic of the World Cup is that it is an event that uses the least amount of public money in the world. The role of government is not investing, but to be a facilitator and inductor."[4] In an interview a few months later, he made the assurance again that "2014 will be a World Cup in which the government will spend nothing in sporting activities." Along these lines, Lula announced that the government would only make investments in infrastructure. All spending on stadium construction would be from the private sector.[5]

In contrast to what was promised, only 1.6 percent of the total cost for the stadiums will be funded by the private sector. The only areas to receive significant amounts of private investment were the airports. According to the Responsibility Matrix, companies that took over the airports in the 2013 bidding would invest R$3.6 billion. But this data was released in September. In December, BNDES (Brazilian Development Bank) approved a credit line of R$5.78 billion for these airports – that is, money from the public treasury would be used in the only area where private investment was to be used.

 
  Jan/10
Matrix
September/13 Variation
Estimated Costs for the World Cup Stadiums (in million R$)
Belo Horizonte 426.1 695.00 61.0 756.0 77.4%
Brasilia 745.3 1,403.3 36.3 1,439.6 93.2%
Cuiabà 454.2 570.1 19.0 589.1 29.7%
Curitiba 184.5 326.7 49.3 376.0 103.8%
Fortaleza 623.0 518.6   518.6 -16.8%
Manaus 515.0 669.5 14.5 684.1 32.8%
Natal 350.0 400.0 52.1 452.1 29.2%
Porto Alegre 130.0 330.0 62.1 392.1 201.6%
Recife 529.5 532.6 5.3 537.9 1.6%
Rio de Janeiro 600.0 1,050.0 119.4 1,169.4 94.9%
Salvador 591.7 689.4 17.8 707.2 19.5%
São Paulo 240.0 820.0 83.3 903.3 276.4%
Total 5,389.3 8,005.2 520.2 8,525.4 58.2%
Source: Elaborated using data from the Responsibility Matrix and the Cup Cash Balance


By the time this first Matrix was released, the overall estimate had already grown. A 2007 FIFA document said that Brazil would spend US$1.1 billion to build stadiums and conduct renovations, which at the time amounted to about R$1.98 billion. In the 2010 Responsibility Matrix, this forecast increased to more than R$5 billion and is now at R$8 billion. When we consider the infrastructure work in the surroundings of the stadiums and the tax exemptions, this figure rises to more than R$9.5 billion: 380 percent more than FIFA had announced.

3. Urban mobility infrastructure

The second area with the largest budget is urban mobility. These investments could leave a positive legacy for the country and improve traffic problems in large cities. However, they are not priorities for the government, and even less so for FIFA. In 2010, investments of more than R$11.6 billion were anticipated for urban mobility. In 2013 this prediction decreased to R$7 billion, and it was not because the construction work became cheaper. As with the stadiums, most of the construction work for urban mobility became more expensive. The difference is that much of it was abandoned. Of the 53 works initially planned, 21 were removed from the Matrix. And of the 12 centers for the World Cup, four have no forecast for any work regarding urban mobility.

4. Budget impacts on the local governments

A common concern among Brazilians relates to the impacts of expenses associated with the World Cup on state and local budgets. To measure this, we compared the predicted expenses for each state and local government with the net current revenue (RCL) and the net consolidated debt (DCL). The situations vary greatly from one city to another. In Manaus, for example, there are no expenses planned for the municipality in the Responsibility Matrix, but Natal will spend the equivalent of 25 percent of its annual revenue – a significant amount that will be missed in other areas. In Recife, the city government will spend more than its net debt. That is, if it were not for the World Cup, the city could have paid all of its debt.

  Direct application of resources Financing Agreement Total % DCL % RCL
Budget impacts of the World Cup on municipal governments
Belo Horizonte 183,340,735 945,250,000 1,128,590,735 40.8% 17.1%
Cuiabá 283,072 0 283,072 0.0% 0.0%
Curitiba 127,421,404 206,200,000 333,621,404 63.1% 6.2%
Fortaleza 59,550,880 206,600,000 266,150,880 44.5% 6.9%
Manaus 0 0 0 0.0% 0.0%
Natal 79,438,397 293,000,000 372,483,397 -200.7% 25.8%
Porto Alegre 9,397,309 0 9,397,309 2.2% 0.2%
Recife 102,402,974 331,000,000 433,402,974 110.8% 13.7%
Rio de Janiero 514,240,000 1,179,000,000 1,693,240,000 19.9% 9.4%
Salvador 616,634 0 616,634 0.1% 0.0%
São Paulo 150,683,000 0 150,683,000 0.2% 0.4%
Source: Elaborated using data from the Transparency Portal and the cities fiscal management reports(6)


Among the state governments, the cases are also very heterogeneous. All states will invest in the Cup, but some expenses are insignificant when compared to annual revenue, such as for Rio Grande do Sul and São Paulo. It is not the same with others, for example Mato Grosso, which will spend about 24 percent of its annual revenue – the equivalent of more than its entire government debt.
 

  Direct Application of Resources Financing Agreement Total %
DCL
% RCL
Budget impacts of the World Cup on state governments
MInas Gerais 372,243,967 400,000,000 772,243,967 1.0% 1.8%
Distrito Federal 1,432,829,710 98,000,000 1,530,829,710 60.2% 9.7%
Mato Grosso 1,440,800,000 847,652,860 2,288,452,860 107.6%% 9.7%
Paraná 45,527,800 229,968,000 275,495,800 1.8% 1.1%
Ceará 312,528,812 554,745,150 867,273,962 25.2% 6.6%
Amazonas 270,278,731 400,000,000 670,278,731 29.7% 6.5%
Rio Grande do Norte 82,100,000 408,671,000 490,771,000 86.8% 6.9%
Rio Grande do Sul 872,537 0 872,537 0.0% 0.0%
Pernambuco 271,826,316 1,277,000,000 1,548,826,316 17.1% 9.0%
Rio de Janeiro 862,500,000 682,402,146 1,544,902,146 2.1% 3.3%
Bahia 408,384,738 573,629,233 982,013,971 9.2% 4.3%
São Paulo 397,9000,000 0 397,900,000 0.2% 0.3%
Source: Elaborated with data from the Transparency Portal & fiscal management reports of the states(7)


5. Expenses not provided in the Responsibility Matrix

Although the Responsibility Matrix estimates investments for the Cup to be R$25.5 billion, in fact the cost will be much higher. For starters, there are expenses that the government itself has officially accounted for but which have not yet been included in the Matrix. In the Transparency Portal of the Cup, there are already expenses that are outside the Matrix, for example the volunteer work program for the Cup, which will cost almost R$27 million.

Expenses prediction for the Cup (in million R$)
  Federal funding Federal Investment Local Goverment Investment Private Investment Total
Urban mobility 4,315.8 - 2,711.7 - 7,027.5
Construction in the surroundings 62.10 17.6 916.8 - 996.5
Stadiums 3,919.8 520.2 3,952.2 133.3 8,525.4
Airports 5,780.0 2,662.8 - - 8,442.8
Ports - 581.0 6.3 - 587.3
Telecommunications - 404.0 - - 404.0
Security - 1,879.1 - - 1,879.1
Tourism 3,137.3 489.2 17.5 - 3,644.0
Temporary structures - - 1,408.8 - 1,408.8
Fiscal waivers for FIFA and partners - 558.8 - - 558.8
Others - 512.2 - - 512.2
Consolidated Matrix 8,297.70 5,707.24 7,819.24 3,751.05 25,569.23
Source: Own elaboration

What is most impressive is the insignificant sum invested by the private sector. The promise by CBF that the World Cup would be “an event that consumes the least amount of public money in the world” obviously did not materialize, and only 0.4 percent of the spending will come from entrepreneurs. Federal funding comprised 50.7 percent, and direct public investment comprised 49 percent. That is right: For every 100 reais of actual spending, only 40 cents will come from private investors. Everything else comes from the public treasury. And it is very expensive: Law 12.348, 2010, allowed for an increase in the city debt for the Cup construction work, indeed bypassing the Fiscal Responsibility Law.

Investments in security and repression

Our estimate only considers the expenses that have been officially released by the government and are related to the World Cup, but there are many other related expenses that are not advertised as such. Gathering these numbers is virtually impossible, but we would like to highlight one of those expenses, which does not appear in the estimates: the one related to repression.

One of the biggest expenses predicted in the Responsibility Matrix is for “safety,” with investments of nearly R$2 billion, just from the federal government. In fact, the main function of this spending is to repress workers, students, and social movements, as seen in the Confederations Cup. The Special Secretariat for the Security of Large Events, from the Ministry of Justice, had bought R$50 million worth of “less lethal weapons” for security. With the protests, an emergency purchase of more than R$8 million[8] in weapons had to be made. The government of Rio de Janeiro spent R$2 million on the same types of weapons in the first half of 2013, which is 66 percent more than in all of 2012.[9] The same thing happened in several states. The government of Rio Grande do Sul, for example, spent R$168,000 in 2011 on less lethal weapons. The expenses in 2012 reached R$316,000, and in 2013 it was more than R$3 million.

The repression is not only carried out by the police. In the Responsibility Matrix, R$708.9 million is provided for the Army, Navy, and Air Force. And to educate the military about how they should act in the cities, the Ministry of Defense in December 2013 published a document called “Guarantee of Law and Order.”[10] According to it, social movements are considered “opposing forces,” and among the major threats that the military should fight, also listed are strikes, urban disturbances, roadblocks, and occupations of public and private buildings. It seems that the government wants to go back to the times of the dictatorship, when the Army used to suppress any demonstration. After much criticism, the Ministry of Defense decided to amend the document and removed the most controversial passages, such as the one listing the “opposing forces.” But according to Vice Admiral Luiz Henrique Caroli, deputy chief of operations for the Joint Chiefs of the Armed Forces, replacing the term “opposing forces” with “agents of disturbance of law and order” is only ”a semantic issue. Using ‘opposing forces’ or ‘disturbing’ agent, in the end, will have the same effect .”[11]

It is the same line followed by a bill that tries to prohibit strikes during the World Cup and includes in the Penal Code the crime of “terrorism,” punishable by up to 30 years of imprisonment for “causing terror and widespread panic.”

6. The differentiated hiring regime

To perform all this infrastructure work, the federal government created an exception to Law 8,666, which defines the public administration rules for bidding and procurement. It is called the Differential Regimen of Public Contracts (DRC), created by Law 12,462 of 2011. According to the DRC, the infrastructure work of the Confederations Cup, the World Cup, and the Olympics does not need to follow the existing rules. The goal, according to the government, was to streamline the bidding.

 

Differences between the DRC and the previous regimen                 Differential regimen of Public Contracts (Law 12.462/11)
Differences between the DRC and the previous regimen
Requires basic project to detail the infrastructure work at all stages, with bidding for each stage (art. 7°, §2°) Government can bid on the infrastructure work without the basic project in case of integrated procurement (art. 8°, $5°); contractor is responsible for the design, execution, and delivery of the infrastructure work
Estimated value for the infrastructure work is public so that companies and controlling agencies can have access to the spreadsheets at any time (art. 3°, §3°, art. 40°, §2°, ll, art. 44, §1) Estimated value of the infrastructure work can be stamped confidental and available only to the controlling agencies, but it is not clear from when and until when (art. 6°)
Amounts payable to the company are set prior to hiring, so that there is an accurate forecast of expenses (art. 7°, §2°, lll, §4°) Variable remuneration can be linked to the performance of the contractor, which makes the process more subjective and subject to deviations (art. 10)
Restricting bidding to a particular brand is prohibited (art. 15, §7°) Bid may indicate a specific brand to purchase a product (art. 7°, l)
In case of withdrawal of the winner, if the runner-up in the bidding does not accept to carry out the infrastructure work for the amount given by the first, it cannot be contracted out (art. 64, §2) Second place bidder may be hired for the value presented by its company in the bidding (art. 40)
Source: In the Shadow of Megaevents, p. 13 (12)  


The Federal Prosecutor’s office filed a direct action of unconstitutionality against the DRC in the Supreme Court.

3. The true legacy – Who and what is the Cup for?

What if all that money spent on the World Cup was invested in other areas? What could be done with it? One option suggested by most Brazilians is to invest this money in education – one of the biggest problems in the country. According to UNICEF, 3.7 million Brazilian children and adolescents ranging from 4 to 17 years old are out of school. To address this deficit, it would be necessary to build 5,917 preschool establishments, 782 primary schools, 593 middle schools, and 1,711 high schools. The cost to build and equip these schools would be about R$15.047 billion for preschools, R$1.846 billion for the primary schools, R$1.769 billion for the middle schools, and R$6.615 billion for the high schools. Therefore, the cost of the infrastructure work necessary to give schooling to all children and adolescents is $25.277 billion, very close to the total cost of the World Cup,[13] according to government data.

But it seems that education is not a priority for our leaders. In Belo Horizonte, Mayor Marcio Lacerda made an absurd appeal to the Supreme Court to not invest 30 percent of the city’s budget on education, as stipulated by the Organic Law of the municipality. Lacerda argued that investing in education would undermine spending on the Cup.[14] On the other hand, Capes, an agency of the Ministry of Education, recommended that academic conferences in Brazil should not be held during the World Cup, since the price of plane tickets was too high.[15]

Another possible use for the World Cup money could be health. According to DataSUS, Brazil had 468,850 hospital beds in 2010. To achieve the recommended World Health Organization level, it would need another 1,964 hospitals with 150 beds each. As a hospital of this size costs around R$60 million, it would be necessary to invest about R$188 billion.[16] Even all the funding for the Cup would not be enough to build all the hospitals needed, but almost one-third of the problem could be solved. (But, as former player Ronaldo – now “ambassador” for the 2014 World Cup in Brazil – said: A Cup is made of stadiums, not hospitals.)

This money could be invested in public transportation. A study from 2013 by the Institute for Applied Economic Research, linked to the government, showed that free passes for students and social free transportation would cost up to R$15.3 billion, slightly less than half of what the Cup will cost.[17] Another idea is to invest in housing for people who do not own property. But exactly the opposite is happening: Thousands of families are being evicted from their homes. Removals have become another hallmark of the Cup, with the poorest being expelled from the tourist areas so as “not to mess up” the realization of mega-events. Nearly 250,000 people have been removed from their homes because of the infrastructure work for the Cup in all the host cities.

 
Number of people removed due to the Cup infrastructure work
São Paulo  89,200
Rio de Janiero 38,297
Porto Alegre 32,000
Salvador 24,000
Fortaleza 20,000
Belo Horizonte 14,000
Recife 12,000
Curitiba 6,000
Natal 4,000
Manaus 3,600
Cuiabá 3,200
Brasilia 2,000
Total 248,297
Source: Curinga Magazine(18)

 















An electronic map designed by architect Lucas Faulhaber[19] shows the relocations in Rio de Janeiro and illustrates where families are being taken from – and where they are being sent to. The policy of the city government is to remove the poor from the most valued areas – thereby making room for real estate speculation – and sending them to a place as far away as possible. With this policy, Mayor Eduardo Paes managed to beat the record for removals of Pereira Passos (1902–1906) and Carlos Lacerda (1961–1965), who had been the Carioca mayors who had removed the most residents.

Relocations maps in Rio de Janeiro

So it is not the poorest who benefit from the World Cup. One could argue that the soccer fans are the ones winning. After all, Brazil will now have modern stadiums for their fans. But the nearly R$10 billion spent on stadiums will also not improve soccer. On one side are those

populations in small towns that formerly did not have big stadiums. In these towns there are not enough fans for regional or national championships, so the buildings will be large “white elephants” that consumed millions in public funds and will remain underutilized. On the other side there are the major capitals, which have enough fans. But these cities already have stadiums that can accommodate large numbers of people. The renovations served only to waste money and make soccer an elite game, as evidenced by the ticket prices, which rose considerably. The clearest example of this process occurred in Maracanã, which was once the largest stadium in the world. Today, it is privatized, has a small audience, and charges high prices for tickets, with the sole purpose of increasing the income of the new owners.

If workers of the Cup receive little or nothing, the same cannot be said of the organizers. It is estimated that in 2014, FIFA will have hit its record revenue by earning around US$5 billion.

 

Source: BDO RCS[20]
 

In 2010, 87 percent of FIFA revenue from the World Cup was profit.[21] In Brazil, where the expenses are almost all public and where FIFA received millions in tax breaks, it is possible that the portion of revenue that is pure profit is even greater.

So, who is the Cup for?

After all these numbers, it seems clear that the World Cup is not for the fans, and much less for Brazilian workers. The Cup is another way for large companies to profit by exploiting workers and getting billions in public money.

Who is the cup for? This is the question that was posed by the National Coordination of Popular Committees of the Cup in its most recent campaign against violations of rights, including economic rights, of Brazilian society. The Popular Committees are organized in the 12 World Cup host cities and coordinate with social movements and endangered populations affected by the projects of urban reconfiguration.

Thus, unfortunately, there is only one answer: The Cup is for FIFA, its trading partners, the Brazilian construction companies that never before in the history of this country profited so much, and the other participants in the business that turned Brazilian cities into merchandise cities during the 2014 World Cup.
 

Translated by Marli Tolosa.


References

[1] 117ª Research CNT/MDA, Feb. 18, 2014, requested by the National Transportation Confederation (CNT) and executed by the company MDA Reseach.

[2] O Globo: Copa vai custar, no mínimo, US$ 6 bilhões.

[3] O Globo: Brasil deve gastar R$ 20,1 bilhões em obras para a Copa de 2014.

[4] Copa de Mundo: Obras em um terço das cidades da Copa são bancadas com 100% de dinheiro público.

[5] O Globo: Lula assina garantias à Copa 2014 e conta com iniciativa privada.

[6] Data accessed on March 18, 2014. The reports on fiscal management from the third quarter of 2013 were withdrawn from the Collection of the Accounting Data of the Federation Ents System (SISTN). As the report of São Paulo was not available in SISTN, a report with preliminary data that is available from City Hall’s webpage was used.

[7] Data accessed on March 18, 2014. The reports on fiscal management from the third quarter of 2013 were withdrawn from the Collection of SISTN. For the states of MT, CE, and RN, the final reports for 2013 were not available, so the reports of the second semester of the same year were used. The loan from the Development Bank of Latin America (CAF) to the government of the state of Rio de Janeiro was included for the renovation of Maracanã, which does not appear in the Cup transparency portal.

[8] Jogos Limpos: Governo Brasileiro gastou R$ 58 milhões com equipamento para conter de manifestações na Copa das Confederações.

[9] Estadão Brasil: Governo do Rio já gastou este ano 66% a mais que em 2012 com armas não letais.

[10] O Ministro de Estado da Defesa: Doutrina Militar de Defesa.

[11] Rede Brasil Atual: Forças Armadas asseguram que poderão reprimir manifestantes se Dilma mandar.

[12] Instituto Políticas Alternativas para o Cone Sul (PACS): Na sombra dos Megaeventos – Exceção e Apropriação Privada.

[13] Revista Educação: E se todo dinheiro da Copa fosse investido em educação pública?.

[14] UOL: Por obras da Copa, prefeito de Belo Horizonte vai ao STF pedir corte do orçamento de educação.

[15]  Correio Braziliense: CAPES quer evitar eventos científicos nas cidades-sede da Copa do Mundo.

[16] Issuu.com: Diagnostico.

[17] IPEA. Increase of the Access to Urban Public Transportation, Proposal in study in the National Congress. Technical note. August 29, 2013.

[18] Issuu.com: Revista Curinga.

[19] Rio Maravilha: Practices, Political Projects, and Territory Intervention in the First Part of the 21st Century. Thesis from the Architecture and Urbanism College at UFF, 2012.

[20] Sport Industry – Analysis of FIFA Revenue, World Cup.

Related Content

  • Dossier: World cup for whom? World cup for what?

    Brazil will host the most expensive World Cup of all time. Around 85 percent of the expenses will be funded with public money. For the first time in history, a multitude of questions are being raised about the real meaning of an international mega-event for the host population. This web dossier was designed to add relevant data regarding the guarantee of people's rights and as offer for critical perspectives about the realities on the ground.

0 Comments

Add new comment

Add new comment