Brazil 2014 World Cup and the market for forecastingBy,

Fernando Posadus, Columbia University

Economic implications for Brazil

Brazilian Ministry of Sports estimates that the country will grow in USD $70 billion due to the World cup.

$30 billion in direct taxes

$10 billion in additional indirect taxes,

$3 billion of an increase in consumption of Brazilian goods and services.

$2.5 billion additional spending in travel industry by 600 000 tourists.

$21 billion for infrastructure. The government expects 332,000 permanent jobs and 381,000 temporary jobs to be created through 2014 mainly because construction of hotels, airport and to remodel 18 stadiums. 

Forbes

Delays and corruption

Despite the investments made, a fifth of the projects were dropped because they could not be delivered on time, while others won't be finished until after the Cup, such as Rio de Janeiro's international airport

Bullet train Rio-Sao Paulo was never initiated.

Four stadiums that have only third-tier football teams: Manaus, Natal, Cuiaba and Brasilia. Brasilia was the most expensive stadium and its price nearly tripled from the original estimates.

Initial estimated cost for stadiums was less than USD $2, the final cost was USD $3.52 billion.

Reuters & Bloomberg

Context

Protest in June 2013 against the increase in buses fare (5.2 rupees).

Then protest for public services, corruption, the cost of living, ineffectual government and more

Government highly criticized for the spending.

Context II

Support for the tournament has already plummeted from 79% in 2007 to 48% in 2013.

The scale of World Cup protests will depend on:

How well the event is run

The performance of Brazil’s team on the pitch. If the national is eliminated early, Brazilians will question more the expense.

(Bruno Torturra, Midia Ninja, a brazilian media group)

Context III

The stock markets of host countries have historically always outperformed slightly in the month following the event. But, on average, the outperformance for host and victor alike tends to fade very quickly and often turns into losses.

World Cup will have an impact on the popularity of President Dilma Rousseff. Expected to stand for re-election in October.

No matter what happens with the World Cup or the election, analysts say Brazil’s economy is large enough to continue to offer interesting opportunities. Brazil’s high interest rates are offering real returns on government bonds of 6 to 7 per cent.

Financial Times

Football predictions and forecasting

Goldman Sachs

Goldman Sachs

Based on a regression analysis uses all the official football matches (no friendly games) since 1960. The sample is 14,000 observations.

Dependent variable, the number of goals scored by each side in each match.

Poisson distribution

Explanatory variables:

1. Difference in Elo rankings between the teams.

2. The average number of goals scored by the team over the last ten official games.

3. The average number of goals received in the last five official games.

4. A country specific dummy variable indicating whether the game in question took place at a world cup.

5. A dummy variable indicating whether the team played in its home country.

6. A dummy variable indicating whether the team played in its home continent.

They used the coefficients of the six variables to run a Monte Carlo simulation. The result of such simulations are used to calculate the probability of the countries to reach a particular stage in the Cup.

Goldman Sachs

Other predictions

Bloomberg: Brazil 1 – Spain 0Itaú Unibanco (Brazil largest bank): Brazil – ArgentinaThe Economist:Probability given by: The outcome of every official FIFA game since 1993Relative ranking of teams when they've played one another The location of games

Why so much interest?

World Cup Brazil will generate $4 billion in total revenue for FIFA, or 66% more than the previous tournament in South Africa in 2010.

Most of the money will come from the sale of television and marketing rights.

FIFA will make total payments of $576 million to the participating associations (37% more than SA).

About 70 million prizes (75% more than SA). Near $35 million for winner and $8 million for the 16 teams eliminated in the group stage (the per-player, per-day amount will be $2,800).

Forbes

Why so much interest?

Global sports industry is worth between €350 billion and €450 billion.

At Kearney

= GDP Cameroon

Why so much interest?

Goldman Sachs

When will India and China play in a World Cup Final?

Population

Popularity of the sport

Performance in other sports

INDIA

Ranked 147 out 207, below Ghana, Haiti, Rwanda, Gambia.

Why is the country unable to produce 11 players out of 1.2 billion?

Poor infrastructure

Competition from cricket

Less urbanized (football played in rural areas which make difficult to reach national levels)

Weak administration. Administrators not linked to the game (political appointees).

Lack of training