May 21, 2014
In 2007, being awarded the right to hold a World Cup event was the answer to a glorious dream. Brazil had big expectations of showing the world they were a major economic power, giving them a good reason to fix a crumbling transportation infrastructure.

There is still a good chance that Brazil will end up hosting a successful tournament, and if the national team is victorious, fans will go crazy with wild celebrations and dancing in the streets. But demonstrations are threatening to tarnish the country’s chance at proving they are an economic power.

The government expected over 60,000 tourists to come for the games, and politicians promised to upgrade dilapidated airports, crumbling roads and other transportation infrastructure. President Dilma Rousseff’s estimated the month-long event would add more than half a percentage point to Brazil’s economic growth while adding more than 500,000 new jobs.

But expectations and reality locked horns recently when it was made known by the Office of the Comptroller General that about $7 billion of the $11.7 billion in planned investments for the World Cup had even been used. Analysts blame the shortfall on poor planning and miles of red tape. Sinaenco, a trade group of engineers and architects, says nationwide, only 36 of 93 major projects have been completed.

Brazil’s sluggish economy will only get a “modest” boost, according to the median of 116 estimates in a global sample of economists polled by Reuters last week. This leaves a concern that the country’s four-year long economic slump will continue. But image is everything when the World Cup is the prize.

Broken promises made by the government sparked violent protests over the warm-up games in June 2013. Then, TV cameras showed the world scenes of broken shop windows and building on fire. The effect of the violent clashes between police and demonstrators was chilling.

The economy suffered then, and it is still suffering today, as protests and demonstrations continue in many of the host cities. While the protests are not as violent as the ones in 2013, they have still caught the viewing public’s eye across the world. There are still many hotel rooms available in the host cities, including Sao Paulo, the host of the opening match.

Airports are seeing a decline in plane reservations in June and July, as business travelers avoid the period. There is also the real concern that many retailers will close their stores and shops, hurting sales. “Most of the local houses, including ourselves, are not including any effect of the World Cup in our growth scenarios,” said Marcelo Kfoury, Brazil chief economist with Citi.

Despite the fears of huge demonstrations keeping many visitors away, James Lockhart Smith, an economist with Maplecroft says, “The negative publicity generated by massive protests, police crackdowns, and images of falling cranes and half-built stadiums will partly be offset by what is likely to be a successful football tournament against all the odds.”