The Lauder Global Business Insight Report 2011 - Knowledge ...

Kicking off the World Cup in Brazil
In 2007, FIFA selected Brazil to host the World Cup
in 2014. This decision is in line with FIFA’s strategy of
rotating the World Cup between the continents and
giving new emerging economies the opportunity to
host. The selection was, therefore, not a surprise: A
South American country had not hosted the event
since 1978, and Brazil’s recent economic and political
performance continues to amaze the world. As Ronaldo
Helal, professor of sociology at the State University of
Rio de Janeiro and author of “Passes e Impasses: Futebol
e Cultura de Massa no Brasil” (Passes and Impasses:
Football and Mass Culture in Brazil), noted in a recent
interview, “The country has experienced 16 years of
economic stability, 20 years of democratic rule, and has
done well during the economic crisis that affected most
developed countries in the past few years.”
Currently the eighth largest economy in the world and the
largest in Latin America, Brazil was expected to have a
GDP growth of 7.8% during 2010. Unlike most countries,
the 2008 crisis had a quasi-imperceptible impact on its
economy, with a -0.2% GDP growth in 2009.
Salvador, founded in 1549 and capital of Brazil
until 1763, is one of the 12 cities selected to host the
competition (along with Belo Horizonte, Brasilia,
Cuiabá, Curitiba, Fortaleza, Manaus, Natal, Porto
Alegre, Recife, Rio de Janeiro, and São Paulo). The
city is one of the cultural hearts of the country, and its
colonial historical center, Pelourinho, was declared a
World Heritage Site by UNESCO in 1985. Salvador has
a population of 2.9 million inhabitants and is the third
largest city in Brazil, although considerably smaller
than São Paulo (10.9 million) and Rio de Janeiro (6.1
million). Salvador contributes about 1% of national GDP
and occupies the 11th place nationally. However, due
to its high level of inequality, the city occupies the 23rd
position in GDP per capita at R$9,240 (US$5,400). In
comparison, the city of São Paulo has the highest GDP
per capita at R$29,394 (US$17,200).
Salvador’s largest economic sector is tourism, and it
is currently the second most popular destination in
Brazil after Rio de Janeiro. According to the city’s local
government, commercial and services activities account
for 75% of the city’s economy and industrial activities
42 Knowledge@wharton • Lauder Global Business Insight Report 2011
account for 25%. The Port of Salvador, located in Bahia
Todos Los Santos, is the largest port in the northeastern
region of Brazil.
Hosting a World Cup is not an easy venture, especially
in a developing country like Brazil. Looking toward the
World Cup, each host city has to be prepared in three
main areas: the stadium, airport and transportation,
and accommodations for tourists. Salvador will
receive financing and investments of approximately
R$1.24 billion (US$730 million), of which about R$1
billion (US$588 million) will come from the federal
government — approximately 6% of the government’s
total planned investment in World Cup preparations.
The remainder will be provided primarily by the state
of Bahia. Observers see this as an enormous net gain
for Salvador and a significant opportunity for the city to
improve its infrastructure.
Fonte Nova stadium
FIFA requests that host nations have stadia with seating
capacities ranging from 40,000 to 60,000 and be adapted
to specific standards, regardless of their locations and
plans for long-term usage. Unfortunately, Salvador’s
Fonte Nova Stadium does not currently adhere to these
norms and is thus in the midst of a major renovation.
According to Adriana B. Dantas, from the department
in charge of World Cup projects at BNDES (Banco
Nacional de Desenvolvimento Economico e Social),
“the demolition and reconstruction of the Fonte Nova
Stadium will cost R$714 million (US$417 million), from
which R$400 million (US$234 million) will come from
BNDES funding.” The new stadium will have a capacity
for approximately 50,000 people and will include 50
suites for 1,000 people, a press area for 1,600 journalists
and a VIP area for 2,500 guests.
One of the key issues when building new stadia is to
have a plan in place to maximize their use once the
event is over, according to Derrick Heggans, Managing
Director of the Wharton Sports Business Initiative.
This is precisely one of the concerns often associated
with organizing mega events such as the World Cup.
Cities end up with stadia that are not used regularly
and become known as “white elephants.” Although
there are two important football teams in the Bahian
capital (SC Bahia and Vitoria FC), analysts fear that