Bloomberg News

Brazil World Cup Puzzle Is What to Do With Stadiums at End (1)

June 14, 2013

Brazil World Cup Puzzle Is What to Do With Stadiums After Events

Spectators watch an exhibition soccer game at Maracana Stadium, also known as the Mario Filho Stadium in Rio de Janeiro. Photographer: Dado Galdieri/Bloomberg

Anticipation in Brazil for next year’s World Cup is being subdued by concern over what to do with many of the 12 stadiums hosting matches after soccer’s biggest tournament ends.

Delays and cost overruns mean that by the time the first ball is kicked in just under a year, the bill for the new and refurbished venues probably will exceed the government’s latest estimate of 7 billion reais ($3.3 billion). Including urban construction, Brazil is spending 30 billion reais on World Cup projects.

In a country where soccer is the biggest draw, the outlay of mostly public money is being used to fulfill the host’s pledge to make it an event “for all of Brazil.” Constructing stadiums in cities including Brasilia, Cuiaba and Manaus, none of which has a team in the top two domestic leagues, may leave little-used legacy arenas.

“Several of these stadiums risk becoming white elephants,” Fabiola Dorr, a member of a team set up by Brazil’s public prosecutors to monitor World Cup spending, said in an interview. “It shows a total lack of planning. For sure, there will be last-minute contracts that further increase the cost.”

Brasilia’s 71,000-seat Estadio Nacional, at 1.5 billion reais the costliest arena, has attracted the most attention and may be the hardest to fill after the World Cup. The 57 games in Brasilia’s state championship so far this year have pulled fewer than 50,000 spectators in total, Valor Economico newspaper reported April 15. The venue will host tomorrow’s opening game of the Confederations Cup, an eight-team warm-up for next year’s global championship.

‘Ridiculous’

“I find it ridiculous,” Romario, a member of Parliament who was the top scorer on Brazil’s 1994 World Cup-winning squad, said in an e-mail. “Obviously they didn’t do a financial viability study for these stadiums for after the tournament.”

About 200 protesters gathered this morning outside the Brasilia stadium, demanding that the equivalent amount of money used to build the stadium be used to create housing for the poor. Some of the protestors used burning tires to block the road outside the arena.

Pedro Daniel, an economist at BDO Brazil, the country’s fifth-largest audit firm, said construction costs per seat are as high as for the most-expensive stadiums built for the 2006 World Cup in Germany.

“The difference is, in Germany, they were able to fill the stadiums once the games were over,” Daniel said.

Public Spending

Former Sports Minister Orlando Silva had said in 2007 the stadium projects wouldn’t require any public money. The latest estimates show they’ll absorb 6.4 billion reais from public sources, or 91 percent of the total costs. Silva didn’t respond yesterday to an e-mail about the plan.

“The cup became a problem at the moment that stadiums were built with public instead of private money,” added Romario. “To make things worse, several urban transport projects which would have been left as legacy were canceled.”

Even local World Cup organizers aren’t sure how some of the stadiums will be economically viable after the tournament.

“It will all depend on the creativity, the imagination of the owners and the operators of these stadiums,” Brazilian soccer federation head Jose Maria Marin said when asked if some of the venues risked becoming a burden on public finances. “It will depend on the imagination of each leader.”

Other Uses

Sports Minister Aldo Rebelo said June 10 they could be used for trade fairs, concerts and other non-sporting events.

Brazil’s Bovespa stock index has declined 18 percent this year, making it the fourth-worst performing index out of 94 in the world followed by Bloomberg. The real has risen 4.3 percent against the dollar this year.

Brazil was the sole bidder for the 2014 World Cup after Colombia backed out before the vote. Leaders of the world’s second-largest emerging market see the tournament and the Olympic Games in Rio de Janeiro two years later as an opportunity to transform cities by adding infrastructure funded by the events. According to soccer’s world governing body FIFA, the South African government said the 2010 World Cup contributed $5.8 billion to the local economy.

“There is no chance these stadiums will become white elephants,” Rebelo said on a conference call with journalists. “They will be much more than football fields. They will be multipurpose spaces that the cities have lacked before.”

South African Experience

The statements echoed those made by government officials and organizers of the previous World Cup in South Africa, where the legacy of building new arenas is proving expensive. The nation spent more than 27 billion rand ($2.7 billion) on the event, with about $1.1 billion on building and upgrading stadiums, according to a report released in November.

The government also used the tournament to expand the highway system around Johannesburg and build public transport, including the Gautrain connecting the city with the main airport.

Cape Town stadium, at 4.5 billion rand the costliest facility, hosted eight games including a semifinal at the 2010 World Cup. The 68,000-seat arena cost 56 million rand to run during the last financial year and generated 14 million rand, city councilor Grant Pascoe said.

Local Debate

Without an anchor tenant, the fate of the stadium, which hosted a sell-out concert by pop star Justin Bieber on May 8, has been the subject of local debate. Provincial leader Tony Ehrenreich said last year it should be converted into affordable housing, while others argued it should be razed.

Durban’s Moses Mabhida Stadium, which hosted the other World Cup semifinal, also is struggling. The 3.1 billion rand, 56,000-seat facility sits a goal kick away from the similarly sized Kings Park, which continues to draw the city’s biggest crowds as home to the Sharks rugby union team.

Moses Mabhida stadium, named for a former general secretary of South Africa’s Communist Party, is now a feature of the city skyline thanks to a 105-meter arch that has a monorail. It had an operating loss of 11 million rand for the year through April 2012, according to eThekwini Municipality spokesman Thabo Mofokeng. He said the council will take control this month once a contract with stadium operator Municipal Management Services ends.

Revenue Needed

Ndavhe Ramakuela, director of the Peter Mokaba Stadium built to host games in Polokwane, said in 2010 the northern city needed between 10 million rand and 70 million rand to maintain the arena. By early 2012, it had sales of 4 million rand, according to a publication from the South African parliament.

“One problem was the idea of sports tourism as a long-term economic strategy in a carbon-constrained world where transport costs will soar,” Patrick Bond, senior professor at the University of KwaZulu-Natal’s School of Built Environment and Development Studies, said in an e-mail. “Another was the tendency of hawkish politicians to promote prestige projects, such as a second, world-class stadium in Durban across the street from the first one.”

Brazil hasn’t hosted the World Cup since 1950, when it lost the final game to Uruguay in front of a tournament-record crowd of 173,850 in Rio’s Maracana stadium. That competition was played in six cities, five of them in southern Brazil where the country’s most-popular teams including Rio’s Flamengo and Corinthians of Sao Paulo are based.

Zurich-based FIFA, which has ultimate control over the World Cup, requires the tournament host to provide a minimum of eight stadiums.

Although spreading 64 matches around 12 arenas risks creating unprofitable facilities in the future, Brazil’s Rebelo said local organizers had little option.

“Brazil is a huge country,” the sports minister told reporters May 16. “How could you have a World Cup in Brazil that excludes 60 percent of our territory, that excludes the Amazon region? It cannot be played only in the south, it has to be played in the cradle of our identity, our culture.”

To contact the reporters on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net; Raymond Colitt in Brasilia at rcolitt@bloomberg.net; Christopher Spillane in Johannesburg at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net


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