Brazilians on the Edge of Their Seats during the World Cup? You Bet – but not for the Reason you Might Think.

During my most recent trip to Brazil, a week before the start of the World Cup, I was eager to understand the mood of the country, and to see whether Brazil, infamous for miraculously pulling things together at the last minute, would live up to that reputation.

My initial impressions were positive. Upon landing in São Paulo, I was pleasantly surprised when our plane taxied right past Guarulhos’ notoriously decrepit facilities to a gleaming new terminal. Riding on the Marginal Pinheiros into the city, I saw crews busily laying fresh sod along the highway, picking up litter, and painting lanes on the road.

However, the more time I spent in São Paulo, speaking to people from taxi drivers to multinational executives, the more it became clear that enthusiasm for the Cup is as shallow as the roots of the freshly laid sod I’d seen along the highway. Of all the executives I spoke with over the week, only one individual was planning on attending a World Cup match.

This may seem odd in a country where football is akin to religion, but I think it reflects the overwhelming sense of anxiety surrounding the impending spectacle. Brazil’s economy has slowed dramatically in recent years, and only 34% of Brazilians believe that the World Cup will boost economic growth. Meanwhile, the slowdown, which is unlikely to reverse course without major economic reforms, has been long and deep enough to affect Brazil’s notoriously Pollyannaish consumers, whose confidence fell in May to the lowest level since 2009.

Despite the country’s economic malaise, FSG clients have generally been more concerned about hitting profitability targets in Brazil than maintaining their top-line growth rates. However, this perspective has recently begun to shift as companies realize that the World Cup is likely to lead to lower sales and falling productivity as consumers stay home and infrastructure is overwhelmed. Indeed, among the executives that I surveyed during our São Paulo Supper Club, 40% stated that they had low confidence that they would hit their 2014 top-line targets in Brazil, the highest level of pessimism we have ever seen among our clients in Brazil.

In addition to the country’s economic malaise, a lot of the anxiety also seems rooted in uncertainty over whether the event will bring escalating protests and violence, and how Brazil is likely to be portrayed in the global press. Brazilians are right to be anxious, given that the atmosphere is ripe for increased protests, with 72% of Brazilians reporting dissatisfaction with how things are going in their county, and roughly six-in-ten thinking that hosting the Cup is bad for Brazil.

However, a poor showing in the World Cup may be precisely what the doctor ordered for the Brazilian economy. Anything but resounding success could very well prove to be disastrous for the incumbent, Dilma Rousseff, in October’s presidential elections. This is crucial because political change in October is a prerequisite for Brazil to implement meaningful economic reforms. Indeed, a recent survey of investors shows that much more than the World Cup itself is at stake during the 32-day-long football tournament, with those polled forecasting that the BRL is likely to slide to 2.5 BRL/USD if Dilma is reelected.

Given what’s at stake for the future of Brazil during the World Cup, I suspect that many Brazilians will be sitting on the edge of their seats over the next few weeks; however, their attention is quite likely to be more focused on what’s happening off the field than on the field.

Tagged on: ,

Leave a Reply

Your email address will not be published. Required fields are marked *