Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Canada’s most-awarded
newsroom for a reason
Stay informed for a
lot less, cancel anytime
“Exemplary reporting on
COVID-19” – Herman L
$1.99
per week
for 24 weeks
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

History tells us that Brazilian equities ought to get a decent short-term bounce if the favoured host country wins the World Cup that begins next week. The dedicated soccer watchers at Goldman Sachs have determined that the winner's stock market outpaces global indexes by an average of 3.5 per cent in the month after the final.

But those who think a successful World Cup will translate into longer-term economic strength and a strong market rebound are likely to be disappointed.

Brazil remains beset by deep-seated structural problems, economic mismanagement, chronic labour strife, a dismal fiscal situation and stubborn stagflation. If anything, its problems are worse in the wake of massive cost overruns for World Cup stadiums, failed promises to build badly needed transportation infrastructure and an inability to reignite growth in the once high-flying BRIC emerging market.

Story continues below advertisement

There's no question that the country that gave us World Cup soccer legends like Garrincha, Jairzinho and Pele will put on a great show on its home turf. And if Brazil can pull off the far-flung, 32-day event without serious glitches, it will provide a badly needed jolt of public confidence and help repair the country's tattered reputation after a string of embarrassing construction delays, exorbitant expenditures and the strong whiff of corruption surrounding the awarding of fat contracts.

The price tag for building or upgrading the dozen stadiums being used for the games has climbed almost four times higher than first estimated – to a whopping $4.2-billion (U.S.) – all of it coming from taxpayers' pockets.

To be sure, a bunch of Brazilian companies are bound to get a healthy sales and stock market boost from the heavy traffic generated by one of the world's biggest sporting events even if – heaven forfend – the national team fails to take home the solid-gold trophy that goes to the winner. An estimated 600,000 foreign visitors and three million Brazilians are expected to take in at least some of the games and other festivities built around them.

Logical beneficiaries include the likes of beer maker Companhia de Bebidas das Americas, the Brazilian chunk of global giant Anheuser-Busch InBev NV, retail chain Lojas Americanas, and team carrier Gol Linhas Aereas Inteligentes SA, which will join other domestic airlines shuttling fans among the dozen host cities.

But even with the World Cup boost, the International Monetary Fund pegs Brazil's growth this year at 1.8 per cent, down from 2.3 per cent in 2013. That would be slow for a developed economy. For a major emerging country, it's downright feeble.

Meanwhile, the latest data show a bump in annual inflation last month to 6.37 per cent, the fastest pace in nearly a year and at the outer limit of central bank tolerance. So far, the central bank is resisting further interest rate hikes in a slow economy. But if the inflation trend continues, the bank will have little choice.

An analysis by Moody's Investor Service on the economic impact of the the tournament reckons that it will produce "short-lived sales increases that are unlikely to materially affect [corporate] earnings." What's worse, "disruptions associated with traffic, crowding and lost work days will take a toll on business."

Story continues below advertisement

No wonder consumer confidence has plummeted to its lowest point in more than five years and investors have pulled money out of Brazilian bond funds for 20 of the past 22 weeks.

Regardless of whether Brazil wins its record sixth World Cup, it's not an enticing picture.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies