According to a report by rating Agency Moody’s, the World Cup, which has been being planned for the last seven years to leave “great legacy” to Brazil, will bring “fleeting” effects to the Brazilian economy.

Here is the report summary:

Football’s biggest tournament will have fleeting effects. Successfully hosting the 2014 World Cup will raise Brazil’s stature on the world stage, but the benefits will be short-lived for most rated Brazilian companies, infrastructure providers, host cities and states and the Brazilian government. The tournament will capture the world’s attention, but an estimated BRL25.2 billion ($11.1 billion) economic boost pales before Brazil’s $2.2 trillion economy, normal levels of investment spending and annual revenues of companies that will provide food, drink, transport, lodging and services to football fans.

A boost for corporate brand image more than sales. Some 3.6 million World Cup tourists will bring a revenue boost for the food and beverage, lodging, car rental, TV broadcasting and advertising sectors, but disruptions associated with traffic, crowding and lost work days will take a toll on business. For most Brazilian companies, the 32-day event in 12 cities will produce short-lived sales increases that are unlikely to materially affect annual earnings. Still, the World Cup is the infrequent sporting event that offers an opportunity for global media exposure, benefitting big corporate sponsors including Coca-Cola Co. (Aa3 stable), Adidas AG (unrated), Anheuser-Busch InBev SA/NV’s (A2 positive) Budweiser and Oi S.A. (Baa3 negative).

World Cup infrastructure spending is a fraction of investment in Brazil. Some BRL26 billion ($11.5 billion) in planned spending on football stadiums and airport, port and urban mobility upgrades is positive for infrastructure providers, but much of the impact has already been felt and it is only about 0.7% of overall planned investment in Brazil in 2010-14. Invepar (Ba3 stable) stands out as the most affected by World Cup spending. Heavy construction companies have gained substantially as well. Construtora Andrade Gutierrez S.A. (Ba1 stable), OAS S.A. (B1 stable) and Mendes Junior Trading e Engenharia S.A. (B1 stable) have seen the largest relative contributions to their backlogs.

World Cup spending is well within revenues for host cities and states. Official estimates of spending related to the World Cup for Moody’s rated sub-sovereign issuers range from a minuscule 0.24% to 12.75% of estimated 2014 revenue. Even under a pessimistic scenario, spending on World Cup projects would remain well within government revenues. Among rated sub-sovereigns, World Cup spending as a percentage of revenues is highest for the state of Mato Grosso (Baa3 stable).

Impact of games pales before Brazil’s economy. We see little impact on Brazil (Baa2 stable) considering the limited duration of the World Cup and the size of the country’s economy. While the event offers a potential reputational benefit, it could be marred by a reprise of the social unrest seen last June or if needed infrastructure was not ready.

Full report here.

 

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