Impact Study for the 2014 World Cup Event

ImpactStudy for the 2014 World Cup

Event

Thesoccer 2014 world cup was hosted in twelve stadiums (Slegers, et al.,2014). In the sporting activity that was to house 32 teams, a lot ofactivity regarding business was expected as the fans will accompanythe teams. In concern to this, more than 3 million Tickets was soldin the event with more than eighteen cities host. As such accordingto the FIFA rules, no single city can hold two stadiums, whichdelineate that the economic and social impact of the 2014 FIFA worldcup could be spread around Brazil cities (Slegers, et al., 2014). Inconcern to this Statistics show that more than ten million passengerswill travel through the Brazilian airports within the thirty-one daysof the world cup (Caetano, Pinsky &amp Laranjeira, 2012). The worldCup in Brazil was a magnificent event and great impact regardingbusiness, employment, tax revenue, consumer spending and the nationalGDP (Rose &amp Spiegel, 2011). As such, the study will analyze theimpact of the 2014 world cup as contained in a sustainability reportby Ernest and Young 2010. Concisely, the paper shall demonstrate thatsporting activities have a great impact in concern to the economicaspect.

History

Thesoccer world cup has been in existence since the year 1930 at aninterval of about four years with minimal exceptions (Caetano, Pinsky&amp Laranjeira, 2012). As such the FIFA world cup has a significanteconomic impact not only to the host nation but also globally. On ahistorical aspect, the world cup has been held in North America,Europe, Asia, South America, and Africa and indeed to all thecontinents with the economic aspect being felt in all those areas(Caetano, Pinsky &amp Laranjeira, 2012). Notably, the economicimpact of the FiFA world cup has been felt by the increased amountthat is offered by the sponsors that translate to greater economicimpact. Concisely, the endorsement of the major multinational in theworld cup not only demonstrates the financial outlay that has beenmade but also shows the level of confidence that is bestowed on theevent (Rose &amp Spiegel, 2011). In this case, multinational such asCoca-Cola, Addidas, and Nike are notable with the amount of supportthey have shown over the years. Notably was the 63 % sponsorship ofthe event by the three multinationals, Coca-Cola, Adidas and Nike forthe 2010 world cup (De Melo, 2011).

Sizeand scope of event

Basingthe argument on the historical background of the FIFA world cup, the2014 event is set to attract a magnificent crowd. In concern to this,the 2010 event had an attendance of 3,178,856 per match with thegames being held in the ten stadiums (De Melo, 2011). Regarding the2014 world tournament, the number of a stadium has been increased to12 further demonstrating that the Brazilian FIFA world cup is set toattract more people than the 2010 world cup. The FIFA world Cup is aglobal event that attracts people from all corners of the earth dueto the popularity of soccer (De Melo, 2011). In concern to this,though the game encompasses male tournaments, the game is widelyendorsed by both genders as demonstrated by the previous events.

Analysisof the financial information

Theevent affects the GDP of the country due to the increased amount ofrevenue generated from the goods and services that are sold duringthe event. In line with this, the Brazilian companies are set toincrease their production capacity so as to cater for the increaseddemand for the products (Fourie &amp Santana-Gallego, 2011). The GDPis set to increase reaching a high value of R$ 64.5 billion for theperiod between the years 2010-2014, which is equivalent to 2.17% forthe year 2010 (Ernst&amp Young Terco,2011).

Inconcern to the number of jobs, the country will experience a netincrease in the employment opportunities. However, the increase inthe number of job opportunities comes with a significant level of jobloss as demonstrated through the function that elaborate such (Fourie&amp Santana-Gallego, 2011).

Inthis case, the function is as Δjobs (I, t) = F (X, Sport)

Inlight of this, the number of jobs that are realized from the event isa function of the population, income and time. The number of jobs isexpected to increase by 3.63Million jobs with an income value of63.48B. If proper care is not taken, the job gains can be short liveddue to the lack of synergy from the sporting event. However, aspostulated in the Ernest and Young sustainable analysis report, theimpacts on the number of a job will not be permanent as the positiveimpacts that will remain will be determined by the interest of thestakeholders.

Theconstruction cost of the stadium are charged once, and the incomeshall be generated over time. During the construction, the amount ofmoney that will be used to purchase the materials shall remain tocirculate in the Brazilian economy (Ernst&amp Young Terco,2011).The people who shall work on the construction sites shall earn theirliving. On the same note, the government is set to gain from thetaxation of all the transactions ranging from the construction,spending, and ticketing (Gitter &amp Rhoads, 2014).

IndirectImpact

TaxImplications

Thetax generated is a function of the amount spent (Moore, 2008). Inthis case, the amount fiscal tax spends multiply by the tax rate.From the event, the consumption rate is set to increase asdemonstrated by the marginal propensity to consume, as such, thetaxable income will increase significantly with a subsequent increasein tax revenue (Moore, 2008). Thus, basing on the previous FIFA WorldCup, the attendance will be in millions and since the government isset to gain tax from Value Added Tax rates (VAT), and from otherincomes much higher tax revenue are expected (Du Plessis &ampVenter, 2010).The increase in spending. The increase in the touristinflow amounts to 79% increase in the year 2014 (Ernst&amp Young Terco,2011).Assuch the additional taxable income amounts to R$ 5.94 which will bechanneled to Brazillian companies further adding more tax (Ernst&amp Young Terco,&nbsp2011).Moreover, the value of the goods exchanged in the system is set toincrease hence generating more money for the economy.

MultiplierAnalysis

Themultiplier effect shall elaborate the amount that shall be spent fromthe direct spending. In this case, the multiplier effect isrepresented by as below

Where

MPCrefers to the Marginal Propensity to Consume MPI is the MarginalPropensity to Import and t is the Tax rate (Jia-hao, 2011). In lightof this, the multiplier demonstrates the increase in the economicactivities that are realized from the injection of resources due tothe effect. As elaborated by Jia-hao, (2011), a major sporting eventdemonstrates two types of expenditure that include the initialfinancial outlay, (construction, refurbishment, and redevelopment)and the direct expenditure during the event such as the ticketing.Concisely, whether it is the initial expenditure or the ticketingrevenue, all the amount is channeled to the country’s economy andhence the multiplier effect takes its course (Jia-hao, 2011).

Consideringthe multiplier effect, it is important that the financial analystconsiders the effect of the event in the inflator prices that areoffered on the market. Concisely, it should be considered with greatcaution the amount of money that flows back into the system as thecountry`s economy is set at a high position during such events(Jia-hao, 2011). As such the multiplier model represented that 55economic activities shall be witnessed while about 110 products willbe offered. In this case, the multiplier effect shall be applied onthe employment, income, tax collection and spending (Ernst&amp Young Terco.&nbsp2011).

SpecificItems Unique to This Sport

Thehost country is known for its unique record in Soccer, and hence theevent is set to attract many people to witness the land of football(Korstanje, Tzanelli &amp Clayton, 2014). AS such, the higherpopulation shall mean a lot to the economic propensity of the nationin general.

Critiqueand Justifications

Theassumption made that the macroeconomic environment is not set tochange was not realistic. In this case, with the injection of a lotof foreign investment and exchange, the business will change. Inaddition, it is assumed that the major source of revenue shall berealized from tourist business and spending. In this case, with suchassumption, the government spent a lot of money on infrastructurethat amounted to R$ 29.6 billion, which is not realistic and does nothold water. As such, the amount that will raise may not reach theexpected GDP and income that I the basis of the tax revenue. Anothermajor assumption was on the number of turnouts that was based on thefact that Brazil is ranked high by FIFA. However, the figure of 3.7Mcould be misleading and too ambitious which is also the reason forhigh expectations in economic gains. Moreover, in the development ofthe sustainability report, it was assumed that corporates andcompanies are well prepared to meet the demand of the huge turnout.In this case, the assumption led to the multiplier figure of 110products. However, this must not be realized as it will depend oncompany’s preparedness and the financing support they are gainingfrom banks.

Sincethe cost of construction amount to R$ 29.6 billion while the coststhat relate to visitors expenses amount to R$ 12.5 billion. The fundswill be raised by the public government (42%) while the rest amountR$ 17.16 billion will be derived from the private companies (Ernst&amp Young Terco.&nbsp2011).In this case, the government expects support from corporatesregarding sponsorship and grants. It is expected that the governmentcan raise the 42% required with ease, but the remaining percentageought to be well planned for. Nonetheless, with the proposedsponsors, it is not a challenge to raise the funds since they arereliable corporates that include Sony, Coca-Cola, Addidas amongothers.

Moreover,the government spending on the infrastructure is very high with thehigh expectations of the economic transformation as demonstrated bythe multiplier effect (55 economic activities and 110 products)(Ernst&amp Young Terco,2011).As such, the government and the economy may fail to attain the goalsdue to the high spending. The government will gain from theadvertising, ticketing, taxation, and loyalties from the ongoingmatches (Coates &amp Humphreys, 2011).

Itis possible to determine and measure in a realistic manner the impactof the event by comprehensive analysis of the sponsor`s information.In this case, sponsors have started manufacturing products that aretailor made for World Cup fans. In this case, the statisticalanalysis of the product demand is a basis for determining theturnout. The demand for the products are compared to the demand forproducts in the previous FIFA world cup and through correlation andregression, it is possible to forecast the turn out realistically.Moreover, the advance ticketing system is also a good measure of theturnout. Regarding the economic impact, the banking indexes thatdemonstrate the increase in borrowing and investment offer a clue asto the preparedness of the investors in the provision of products forGDP to rise.

Conclusion

Thefact that Brazil will host the 2014 World Cup means that the countrywill make significant economic gains. In this case, as demonstratedby the taxation revenue, job opportunities and reduced crime rate,the residents will gain considerably. However, caution should beexercised so that the increase in the revenue translate to favorableeconomic conditions as the multiplier effects delineate. Moreover,the increase in the number of sponsors aggravates the situation assuch encourages the investors and other entities to have confidenceabout the event. Conclusively, Brazil world cup 2014 will be asuccess and an opportunity for the country and the residents to makemoney in almost all the sectors.

References

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Slegers,C. A. D., Reuter, M., Günther, S., Schmidt-Chanasit, J., van derVen, A. J., &amp de Mast, Q. (2014). Persisting arthralgia due toMayaro virus infection in a traveler from Brazil: Is there a risk forattendants to the 2014 FIFA World Cup?. Journal of Clinical Virology,60(3), 317-319.