Economy & Trade, Headlines, Latin America & the Caribbean

BRAZIL: Murky Finances Haunt 2014 Football World Cup

Leonel Plügel

RIO DE JANEIRO, Jun 23 2010 (IPS) - Delays in construction to prepare for the 2014 football World Cup, to be hosted by Brazil, bring to mind the budget overruns and the secretive bidding process ahead of the Pan-American Games held in Rio de Janeiro in 2007.

“The construction delays could lead to contract violations, as occurred in the 2007 Pan-Americans, which ended up costing 4 billion reais (2.1 billion dollars),” said opposition lawmaker Silvio Torres, of the Brazilian Social Democracy Party (PSDB) and president of a congressional regulatory subcommittee for the 2014 World Cup.

Those were the figures cited by the press and by an investigative commission of the Rio de Janeiro council, which was unable to reach a final conclusion on the matter.

The budget planned in 2003 for the Pan-American Games was 386 million reais (about 204 million dollars), but according to the authorities the expenditures reached one billion reais (529 million dollars).

“We are on the way to making the same mistakes” for the 2014 World Cup, Torres said, because in the rush to complete “construction of stadiums and infrastructure on time,” the government decided to “flexibilise” the bidding contract requirements.

The lawmaker believes the less rigorous controls will “make it difficult to know what the final cost of the World Cup is going to be.”

“The government only decided in January to get fully involved in the matter, injecting funds in order to meet the agreed deadlines,” Torres told IPS.

The administration of President Luiz Inácio Lula da Silva released 5 billion reais (2.65 billion dollars) in late May to Infroaero, the regulatory body for Brazil’s airports and air traffic, to update the terminals in the cities that will host the games of the 2014 FIFA (International Federation of Association Football) championship.

Meanwhile, the National Economic and Social Development Bank (BNDES) opened a line of credit worth 4.8 billion reais (2.54 billion dollars) for stadium reforms and construction.

The 2014 World Cup Organising Committee designated 12 cities as hosts for the matches: Belo Horizonte, Brasilia, Cuiabá, Curitiba, Fortaleza, Manaus, Natal, Porto Alegre, Recife, Rio de Janeiro, Salvador and São Paulo.

More than half of the work to remodel or build new stadiums, for example, in Manaus, Recife and Natal, has fallen behind schedule. There are also delays in modernising the airports and the infrastructure in the cities to host the World Cup matches.

Neither the Ministry of Sports nor the Organising Committee would respond to IPS’s repeated requests for comment — at least not until their top officials return from South Africa, where the World Cup is under way, with the final match to be played Jul. 11. The Brazilian national team remains a contender for the title.

It was on Oct. 30, 2007, that FIFA announced Brazil would host the 2014 World Cup. The South American giant hosted the tournament back in 1940, and holds the record for most World Cup titles, with five.

That day, Ricardo Teixeira, president of the Brazilian Football Confederation and of the Organising Committee, “said that the financing for the stadiums would come from private sources,” said Torres.

“That private capital never appeared because of the 2008 financial crisis, and because of the inability to sustain the stadiums after the Cup takes place,” added the lawmaker.

Marcelo Damato, chief editor of Brazil’s top sports magazine, Lance!, pointed out the contradiction that “the World Cup, a private enterprise of FIFA,” and Teixeira’s promise of “private investors,” has ended “in a request for public funds” to finance the infrastructure.

Torres also pointed out that as host of the event, “the organising country signs an onerous contract with FIFA in which it commits to tax exemptions for the sponsors, marketing companies, television broadcast rights,” just to name a few of the partners of the institution in charge of the global football championship.

To reach that point in an agreement, the host countries often modify their local tax laws — and Brazil is no exception.

“It is very unlikely that Congress will pass the Executive branch’s bill on the matter this year,” he said, “because of the presidential elections in October.”

The legislator explained that the Brazilian government would lose out on 900 million reais (473 million dollars) in tax revenues as a result of such an agreement.

“That is the figure we in the regulatory subcommittee were told by two technicians from the Receita Federal,” as the Brazilian tax service is known.

If Congress does not approve the legislative bill before Jan. 1, 2011, Brazil could lose its status as host, because that is FIFA’s deadline for committing to the tax exemptions for its partners.

“Teixeira himself confirmed this in a public hearing in the congressional subcommittee, when he appeared there to provide explanations for the work delays and high costs of the World Cup preparations,” said Torres.

In parallel, the government authorised the host cities not to collect taxes on services and on the circulation of merchandise, which could bring Brazil’s total losses in tax revenues to 1.2 billion reais (630 million dollars).

Damato said the public money earmarked for organising the tournament “should be between 10 and 25 billion reais (5.3 and 13 billion dollars).”

In his opinion, “3 or 4 billion reais should go to the stadiums” and the rest “should be invested in urban infrastructure.”

“The World Cup will bring economic benefits,” he said, but it is essential to establish “whether the price paid is fair, and whether the construction projects are in keeping with the country’s priorities.”

Legislator Torres said “the only thing that matters to FIFA is that its partners don’t lose money and that the Federation itself make money from the Cup at zero cost.”

The 2014 World Cup Organising Committee pledged to complete all of the stadiums by Dec. 31, 2012 — a year and a half ahead of the start of the tournament.