July 18 (Bloomberg) -- It’s back to business as usual for Brazilian soccer team Corinthians after the end of the World Cup. That’s good news for Sao Paulo.
The club played last night in the new 1 billion-real ($450 million) stadium that hosted six games during the quadrennial competition, including the opener on June 12. Last night’s 2-1 victory against Porto Alegre’s Internacional came four days after the end of the world’s most-watched sporting spectacle.
While the World Cup proved to be a humiliation on the field for the home team, construction projects in full use, from the 48,000-seat arena to a new airport terminal, bode well for Sao Paulo. In contrast to the experience of cities such as Athens and Beijing, South America’s biggest metropolis may be positioned to make the 6 billion reais spent there pay off.
“It’s our biggest market, it already has a very developed services infrastructure, has high-qualified labor and a huge population,” said Joao Batista Bonomo, a professor of business at Ibmec Educacional, a higher-education institution in Belo Horizonte. “Sao Paulo is in good shape to absorb these investments.”
Government spending for the World Cup and for the Rio de Janeiro Olympics in 2016 triggered the largest street protests in two decades last year. Crowds objected to new stadiums while schools, hospitals and roads remained in disrepair. They had reason for their doubts: A review of 36 sporting events by What Works Center for Local Economic Growth in the U.K. found that major related projects typically have few or no measurable economic effects.
At least four of the 12 stadiums built or refurbished for the month-long soccer tournament are in cities without major clubs. In the state of Mato Grosso, where the government spent about 570 million reais on a 44,000-seat arena in Cuiaba, the local league sold fewer than 500 seats per game this year, according to the Mato Grosso soccer federation. Manaus, an industrial city cut into the Amazon jungle, is so remote that building supplies for its facility had to be flown in or shipped along the Amazon River.
Sao Paulo is different, said Mayor Fernando Haddad. Much of the spending there for the World Cup was private, including a new 2.9 billion-real terminal at Guarulhos Airport built by a group led by Grupo Invepar, a transport-infrastructure company based in Rio, and Airports Co. South Africa.
“The inauguration of Terminal 3 was a feat that put the airport on an international playing field,” Haddad said in a June 10 interview at City Hall. “The city responded very well to the demands.”
The local and state governments spent about 550 million reais on overpasses near the Corinthians stadium and offered builders tax breaks of as much as 420 million reais. The soccer club, which played the first two games at the park before the World Cup, took on all the stadium debt, tapping loans at below-market rates from the state-development bank BNDES. Three workers died during construction of the arena.
Andrew Zimbalist, a professor of sports economics and Latin American development at Smith College in Northampton, Massachusetts, said money earmarked for mega-sporting events usually ends up as a drag on local economies. Still, there are a few examples of cities that got it right.
“The 1984 Olympics in Los Angeles and the 1992 Olympics in Barcelona were positive for development: Both relied heavily on private funding, and Barcelona got most of its funding from national and provincial, not municipal sources,” he said in an e-mailed response to questions. “These two cases were special.”
Whether Sao Paulo will join that short list remains to be seen. Haddad, who is up for re-election in 2016, used the World Cup preparations to further his agenda, including polishing the city’s image for the event’s 500,000 visitors.
“We have one of the world’s best nightlives for culture, music, gastronomy and partying,” Haddad said. “Most of those who came in for the first time will come back.”
For locals, he used the event to kickstart development in the impoverished eastside. The stadium was built in the area known as Itaquera on land owned by the football team that sat unused for several years.
“Over the medium-to-long term, the east zone will benefit the most from the event,” Bonomo said by telephone. “It opened the doors of a dormant area of the city.”