Bloomberg News

World Cup Tests Rousseff And Brazil’s Stars as Vote Nears

May 15, 2014

Dilma Rousseff

Brazilian President Dilma Rousseff. Photographer: Evaristo SA/AFP via Getty Images

The World Cup won’t only decide the planet’s best soccer team. The big spectacle’s success or failure will also help determine who’s going to govern Brazil.

Workers staged strikes in several cities today, including Recife in the country’s northeast where military police have walked out on the job. Following looting there, Brazil today sent in armored trucks and the National Guard. Protesters also snarled traffic in various points of Sao Paulo, including one area four kilometers from the city’s World Cup stadium, O Globo reported. Demonstrators marched against the elevated costs of hosting the world’s most-watched sporting event.

The tournament has become a test for President Dilma Rousseff ahead of elections in October. The euphoria felt when Brazil won hosting rights in 2007 under Luiz Inacio Lula da Silva has faded, and Rousseff, whom Lula chose as his successor because of her managerial skills, has more to lose than gain from the event, according to Joao Augusto de Castro Neves, analyst at political risk consultancy Eurasia Group.

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“If it’s a huge flop, and you see problems with stadiums, or if it becomes clear that Brazil improvised to a great extent, it’ll fall into her lap,” Neves said by phone from Washington. “The government is the main body responsible here for hosting the event, so the opposition could benefit if the organization of the games is a failure.”

Forced Removal

Demonstrations were planned today in 10 of the 12 cities hosting games over issues ranging from what the activists say are forced removal of people from homes to make way for cup-related projects, the amount of money spent on the event and the government’s failures to provide better health care and education.

The protests and the disruption they may cause add to a long list of potential logistical issues during the tournament, for which Rousseff would probably be blamed, Neves said. They include the possibility of transportation delays that keep teams and fans from reaching stadiums on time, power or water outages at venues, visitors victimized by crime and congestion at airports.

Last June, a bus fare increase sparked Brazil’s biggest demonstrations in two decades, bringing 1 million marchers into the streets to demand better transport, health and education services. The protests occurred during the Confederations Cup, a warm-up event for the World Cup, and drove Rousseff’s popularity to an all-time low.

Splinter Groups

Can Brazil Compete in the International Economy?

Since then the marches have waned, largely because some splinter groups engaged in vandalism and violence, Neves said. For a time, the president’s standing rebounded.

Public opinion polls published since late March have shown Rousseff’s support dwindling again. In a Datafolha inquiry published May 9, 37 percent of those surveyed said they would vote for her in October, down from 44 percent in February.

For the first time, the poll suggested she would not win in the first round, when a candidate must poll better than the total of her challengers.

In a second round against her leading challenger, Senator Aecio Neves, Rousseff was ahead by 47 percent to 36 percent, the poll showed. The survey of 2,844 people taken May 7 and 8 has a margin of error of plus or minus two percentage points.

With the election growing tighter, major protests during the World Cup would strike another blow to her popularity, especially if they disrupt tournament logistics, according to David Fleischer, a University of Brasilia political science professor.

‘Play Out’

“The opposition is probably licking its chops to see how this is going to play out,” Fleischer said by telephone. Political rivals will seize on disturbances “to say that she was neglectful, that she didn’t prepare well, that nothing was done to respond to the complaints of last year.”

The so-called Popular Committees of the World Cup organized some of today’s protests. The largest demonstrations were slated for Sao Paulo, Rio de Janeiro and Porto Alegre, with about 8,000 people signed up to attend on Facebook as of yesterday. The tournament begins June 12, with the final in Rio on July 13.

Police today deployed pepper spray and nightsticks against protesters from the landless movement in Brasilia, according the website of the Globo network. Prison workers in Bahia state, where host city Salvador is located, went on strike today, Globo reported. Teachers in Rio maintained their strike and joined those protesting against the World Cup. With Recife’s police officers on strike, looters pillaged stores and supermarkets yesterday, and today some merchants closed shop.

‘Capable’

The army said on its Facebook page that it would remain in Recife for as long as necessary. Justice Minister Jose Eduardo Cardozo traveled to the city to meet with Joao Lyra Neto, the governor of Pernambuco state, the ministry’s press office said by phone, confirming it also dispatched the National Guard.

“Brazil will know how to receive well those who visit for the World Cup,” Rousseff said in Brasilia today. “We are capable of putting on the Cup of Cups.”

Protesters are taking advantage of global attention ahead of the World Cup to present complaints that have nothing to do with the tournament, Gilberto Carvalho, her secretary-general, told reporters in Brasilia today.

The Risk

The risk for Rousseff is that if something goes wrong during the tournament, the whole world will be watching, said a government official from the presidential palace with knowledge of the discussions there about the event. The official added that with reports having been negative, expectations have been lowered about the quality of the event. If the tournament comes off without any major disruption, such as protests or energy shortages interrupting games, it will be considered successful, the official said.

The presidential press office declined to comment about the risks the tournament may pose to Rousseff’s re-election.

While the World Cup will play a role, Rousseff’s re-election bid hinges more on people’s sense of the economy, with low unemployment offsetting inflation that’s eating away at purchasing power, according to Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc.

With rising prices pinching Brazilians, consumer confidence in April dropped to a nearly five-year low. Inflation has re-accelerated, to 6.28 percent, after subsiding from a 6.7 percent high at the height of protests in June. The World Cup will produce another seasonal quickening of inflation, Finance Minister Guido Mantega told Agencia Estado in April. Unemployment has remained near record lows, at 5 percent in March.

Brazil’s Economy

Brazil’s economy has grown at an annual average of 2 percent during Rousseff’s term, the slowest rate for a Brazilian President since Fernando Collor, who resigned in 1992 amid corruption allegations.

Brazil’s benchmark Ibovespa stock index tumbled 26 percent during Rousseff’s first three years in office. Since the poll in March that showed her first drop in support, the Ibovespa has risen 8.5 percent. Standard & Poor’s in March downgraded Brazil’s credit rating to one level above junk, citing the deterioration of fiscal policy and limited ability to adjust before elections.

One question being discussed is whether a World Cup victory by Brazil’s perennially strong national team would boost Rousseff’s political fortunes -- or conversely whether a failure would damage them.

‘Get Furious’

“If Brazil doesn’t win to distract people a bit, we’ll see them get furious at the government,” said Ari Santos, an equity trading manager at H. Commcor in Sao Paulo. “It diminishes Rousseff’s chances, because resentment will flare up.”

The last three elections weren’t influenced by the World Cup outcome. Brazil’s victory in 2002 didn’t save the ruling party’s presidential candidate from defeat. Lula won re-election in 2006 even as the national team lost, and in 2010 his hand-picked successor, Rousseff, won after Brazil flopped on the field in South Africa.

The current team, led by forward Neymar da Silva Santos, known as Neymar, who plays for Barcelona, beat 2010 World Cup winner Spain in the Confederations Cup as demonstrations raged outside the stadiums. Brazil is the favorite to capture the title this year, with U.K.-based Ladbrokes putting them at 3-1 odds.

Brazil is spending about $11 billion to host the World Cup. The 12 new and refurbished stadiums cost 8 billion reais ($3.6 billion), or about 40 percent more than originally budgeted.

Money Spent

Eighty percent of Brazilians say that money spent on the stadiums could have been put to better use, according to a MDA survey commissioned by the National Transport Confederation in February.

None of that has convinced Joao Augusto da Silva that protesting before elections is worthwhile.

“Protesting now does nothing to help,” said Silva, 30, as he watched a May 3 demonstration in Belo Horizonte. “The works are already done, and we’re ready for the World Cup. So they’re just going to ruin the mood.”

That’s the type of attitude Rousseff should hope her detractors adopt during the World Cup, according to Goldman’s Ramos. Whether they do or not depends on the tournament going off without a major hitch, he said.

“If the organization of the Cup is flawed, the government has to own the problem,” Ramos said. “The World Cup is a test of efficiency. If she pulls it off, it’s what’s expected. There’s only downside.”

To contact the reporters on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net; Anna Edgerton in Brasilia at aedgerton@bloomberg.net

To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Randall Woods


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