World Cup 2014: Legacies and Future Stadium Viability

“Brazil is a huge country…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.”

Above is the argument made by Brazilian Sports Minister Aldo Rebola when confronted with questions regarding the twelve stadiums to be used for the FIFA World Cup being held this upcoming summer.  The discussion surrounding the twelve stadiums is certainly not simple.

Sepp Blatter announcing Brazilian hosting - Courtesy of Ricardo Stuckert and www.agenciabrasil.com.br

Sepp Blatter announcing Brazilian hosting – Courtesy of Ricardo Stuckert and www.agenciabrasil.com.br

To begein with, FIFA requires a minimum of 8 host cities of which only one city may utilize more than one stadium.  This is a commonly known fact and is reported often, however what isn’t always mentioned and also adds a little context to Rebola’s comment is that FIFA sets a maximum of 10 host cities.  In order for the Brazil World Cup to maintain 12 host cities, it had to request an exception from FIFA.

When looking at the map of the distribution of host cities and which ones involved the construction of new stadia, a number of questions regarding the necessity of 12 host cities arise especially with regards to Sao Paulo.  Sao Paulo is host to 6 professional soccer teams, 3 of which play in the Brazil’s top league (Sao Paulo FC, Corinthians and Portuguesa) with a well known fourth team in Palmeiras in the league below.  With so many professional teams it is interesting that one of the new stadia will be in Sao Paulo, surely there is a venue in existence that could be renovated for less than the cost of a newly constructed stadium.

In fact, there is such a venue.  The new stadium will be occupied by Corinthians, their old stadium, was actually proposed as a potential site but was turned down due to the lack guarantees on the finances required to complete the necessary renovations to meet FIFA standards.  Ironically, earlier this year, construction of this stadium delayed as there were issues with the guarantees involved in the loans.  The guarantees were not based on physical assets but rather on future projected revenue including naming rights.

The biggest controversy involved in the stadia is simply how much public money is being spent on the construction.  It was promised in 2007 by the previous sports minister, Orlando Silva, that the stadia projects wouldn’t require any public funding.  That has since changed as public spending is reported to exceed 8 billion reias (over USD $3.5 billion*) a figure and subject that even former World Cup winning Striker and Brazilian parliament member Romario balks at through print and radio.

While the cost alone is a huge issue the controversy is augmented by the fact that in order to maintain it, plans to significantly develop infrastructure were completely cut.

This all leads the current issue at hand.  All the focus is on whether the venues will be completed by the December deadline (a deadline originally set for December of LAST year that was grossly failed to be met), however very little focus has been dedicated to the financial feasibility of the new stadia post World Cup and Olympics which will also be held in Brazil. While the stadia in Sao Paulo and Recife have clear future and competitive soccer team tenants, in Corinthians of Sao Paulo and Recife’s 3-team co owners, the other 4 newly built venues have serious issues of future viability after the world cup.

According to an Economist special report, Manaus, the most northern Amazonia host city faces one of the biggest tasks in maintaining its stadium after the world cup.

The city’s football team plays in a low division, with matches attended by only a few hundred fans. The teams in three other host cities, Brasília, Cuiabá and Natal, also draw small crowds.

Monthly maintenance costs of the Manaus stadium runs half a million reias and it maintains a similar capacity as the other four mentioned cities.  The other eight venues are renovated and have long term sporting tenants who almost instantly create a a future viability but as for the smaller ones, even some world cup organizers don’t have much of an idea how costs will be met.  Brazilian Soccer federation head Jose Maria Marin had this comment about some venues becoming public burden.

It will all depend on the creativity, the imagination of the owners and the operators of these stadiums

Though, it is arguably not 100% his responsibility to come up with answers to complex viability issues, his response is certainly not comforting and neither is the insinuation that simply hosting business meetings and municipal shows will create a sustainable source of revenue month after month after month.

With the previous World Cup held in Brazil utilizing six venues all in the south of Brazil, it is understandable that a focus is put on having a northern Brazilian representation that necessitated 5 of the 6 new stadia.

The flipside though is that with the complete reliance on public funds resulting in the cancellation of infrastructure projects that arguably have a significantly greater legacy than a 45,000 seat stadium, begs a necessary question. Does the cost of this World Cup and the future viability of what will be some of the only physical World Cup legacies ruin the intangible legacy that hosting the worlds most popular tournament of the worlds most popular sport normally endows?

*Conversion rate of Reias to US Dollars based on current Bloomberg.com conversion rate of 2.2034 reias to 1 US Dollar

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Reporting on the business side of the world's game.