Russia is now facing what few countries have been capable of doing through history: hosting a World Cup. It ain’t an easy task, we know that: enormous preparation, investments and hard work is required. Now, while the costs incurred are gigantic, this massive-sport event may not produce the outcome the host nation wishes, as it occurred in Brazil or South Africa. Thus, in this brief article we inquire on what will the future depart for Russia, a country that is new on this subject but seems to be well prepared for the task of hosting a competition of such magnitude as the FIFA World Cup.
Will it be different for Russia?
While analyzing the World Cup historic record, Brazil has showed us how twisted the situation may turn for the hosts. At first, the expectations where over the roof in the South American country, and when your country spends 15 billion dollars with the sole purpose of preparing for the World Cup, one may expect that the revenue generated across the nation might have been astronomical. It wasn’t; in fact, it was scanty.
The statistics were chaotic: Brazil was left stranded with no more than $ 100 million of the “Legacy World Cup Host” bestowed by FIFA and the impulse around consumption given by tourists. On the other hand, FIFA, which is a nonprofit organization, earned 4,8 billion dollars from the 2014 WC by receiving the revenue from TV rights, Marketing rights and ticketing among other things. They only had a surplus of 2,5 billion after deducting the expenses: five times more than what Brazil as a nation had as “profits” from the World Cup, according to TIME magazine.
FIFA earned through Broadcasting Rights 2,428 million dollars in the 2014 World Cup.
Will history be different this time at Russia? Probably not. FIFA still keeps all the rights of the event, so the host nation will only count with tourism revenues (hotels, transportation tickets, food consumption, etc). It is important to mention that Russia will keep the stadiums built as an investment, but the question that arises is: how relevant is to have football facilities in a country without a strong football tradition?
Many of the new stadiums, such as Nizhny Novgorod Stadium or the Volgograd Arena, will be the home for second-tier teams in future years, who will difficultly fill the venues throughout the following seasons. This doesn’t seem to be encouraging at all, but to be honest, the whole scenario seems to be better than the one we saw in Brazil, where stadiums were left to be used as parking for buses or playgrounds for children’s parties.
How are the Russians feeling?
If we talk about how the Russian government is feeling, the landscape is nothing but bright. According to ESPN, the Russian government has issued a report saying that the entire World Cup will generate up to 30.8 billion dollars from 2013 to 2023. This would be achieved by generating jobs, more tourism, improving infrastructure and future private investments. On the other hand, this all has a cost, which is estimated to be of $ 11 billion for carrying out the proper preparations.
This seems like a good deal after all, right? As a country, Russia would supposedly end up having more than a 20-billion-dollar surplus by hosting the World Cup. The thing is, every country has thought that way, even Germany did in 2006. Now, economics doesn’t work that way. Jobs are temporally used for infrastructure projects and do not tend to remain in the long term, so, the WC can be economically interpreted as a temporary stimulus to the country, but the nation’s economy will bounce back to its long-term path.
South Korea and Japan are the perfect example to illustrate the point. These two powerful Asian countries won the host selection for the 2002 World Cup that took place in 1996. They invested on stadiums huge amounts of money, all to win prestige at international level and produce a good economic outcome. They partially achieved the former, not at all the latter. According to the Washington Post, South Korea and Japan ended up receiving an interesting number of visitors that left happy from the World Cup, but, if we talk about economic repercussions, both nations struggled the following years because of the deficit caused by the World Cup in 2002.
Yokohama International Stadium held the final of the 2002 FIFA World Cup.
And how to forget about corruption
Corruption in Russia has a recent precedent: the Winter Olympic Games that were carried out on Sochi. Now, the estimated value of the games were 50 billion dollars on paper, an amount that exceeds without a problem any preparation cost for all winter competition in history. Truth is, it was all a façade; Russia’s government confirmed a couple of weeks later that the event did cost way less. This only leaves the possible explanation of juicy contracts that were made under the table and smell way too much like corruption.
After all, the things aren’t looking that good…
It is way too early to draw a conclusion about how things will turn out, but, one thing is certain: history is here to teach us from our mistakes. The last 20 years have taught us that countries that host the World Cup never end up having a monetary surplus; they all end up spending billions on stadiums and receiving very few revenues from consumption and “legacy” payments from FIFA. Consumption is hard to measure as it is relative to the economy’s growth, but it has always fall short and never even gets close to the expenditure level.
Russia will be facing a tough challenge, that’s for sure. A disastrous World Cup hosting record, unreal expectation and corruption don’t seem to be a good start for the hosts. Nevertheless, the future is uncertain, and the country’s government could show great investment strategies in the following years, all part of a development program that started since the World Cup preparation. There is just one thing left to be done for us to know what will happen: wait. Until then, let’s enjoy the World Cup.