Jun 10 2014

In 2006, when Brazil won the right to host the World Cup, the government hoped it would showcase the progress the country is making to becoming an economic giant.

Back then the economy was growing by 4 to 5% a year powered by high commodity prices and domestic consumption.

However, economic growth has faltered in recent years. Commodity prices remain well below the peaks reached in the middle part of the last decade, while domestic demand has been softening with consumers now weighed down by high levels of debt.

The run up to the World Cup has also highlighted widespread dissatisfaction among Brazilians. Protesters have taken to the streets of many cities to attack the government for the perceived high cost of preparations for the World Cup and the 2016 Olympics, which will be hosted by Rio de Janeiro, calling for the authorities to place more priority on education, health and transport. President Dilma Rousseff, who is seeking re-election in October, has sought to deflect criticism, saying that the World Cup will spur growth.

The economy could certainly do with a lift, with GDP expanding by just 0.2% from the previous quarter in the first three months of 2014, while economic growth in the last quarter of 2013 has been revised down to 0.4%.

Slowing economic growth in China, Brazil’s top trading partner, weighed on prices and export demand for key commodities like iron ore and soybeans. Moreover, the central bank has been raising interest rates since early 2013 to bear down on inflation, with the benchmark Selic rate now standing at 11%. Consumer prices have risen by about 6% a year since 2010.