How the World Cup has Surprisingly Affected Brazil’s Economy

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    The Costa Rica News (TCRN) – The enacted public holidays in Brazil for the World Cup in which during every match of the national team a view of empty streets and closed businesses repeats, is beginning to be felt in the economy, with a drop in industrial production and activity in general.

    The indicators reported so far contradict at least short-term the Brazilian government’s arguments about the benefits of the World Cup for the country’s economy.

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    While Brazilians enjoy each year an average of nine national and regional holidays, seven so far in 2014 in Rio de Janeiro, and counts twelve holidays partly due to the decision of the council to release the workdays which are matching with the matches in the Maracana Stadium.

    And every day without work represents a loss of 3.610 billion in the Brazilian industry, according to estimates by the Federation of Industries of São Paulo (Fiesp).
    A few days after the end of the championship, the first to raise the alarm were the sectors of automotive and appliance.

    According to a report by the Brazilian Association of Electrical and Electronics Industry, 58% of the companies in this sector foresee losses in production during the tournament.

    Big manufacturers like Whirlpool, Samsung and Continental granted collective vacations for much of their workforce regarding the fall of demand and concerns that the performance of the operators falls during the days with games.

    Electrolux executives, for example, decided to give collective vacations during the tournament to 4,600 of its 8,600 workers in Brazil, while the Samsung factory in Manaus has been closed since June 9.

    The bank played a key role in the outcome of the automotive industry in the first half. Vehicle production fell by 23.3% between May and June and that decline was attributed in part to the Worldcup as it reduced the month to only 17 business days in June.

    Several groups of small traders also expressed concern at the loss of sales during the tournament. The Trade Union Shop of the municipality of Rio de Janeiro estimated to suffer losses of 869 million dollars over the Worldcup due to the closure of establishments before matches.

    Marco Antônio Ferreira, manager of the Mais Shopping mall of São Paulo said, “In the first games the fall of sales reached 50% (…) even after the games because consumers do not return.”

    The Sao Paulo Stock Exchange, the main stock exchange in Latin America, is also feeling the vagaries of public holidays during the tournament and last week only operated normally in three days, which meant less turnover.

    In addition, companies that do not stop their operations in the holidays have additional expenses and overtime wages which can amount to 58.700 million, according to the Federation of Trade in Goods, Services and tourism of the State of São Paulo.

    However, some sectors, such as beverages and related activities are breaking sales records thanks to the World Cup.

    Fábio Bentes, economist of the National Confederation of Trade in Goods, Services and Tourism, says that although the World Cup Holidays bring significant benefits to the sectors associated with entertainment and food, “sales are lower because circulation drops dramatically when there are parties.”

    TV makers admit that the demand for TVs in the first half of 2014 increased by 45% and the beer industry enjoys strong increase in demand during the championship, driven in part due to public holidays. Between April and June the Brazilian beer production increased 12% from the same quarter of 2013.

    The figures in these sectors benefited from the contrast with the Worldcup released this week by the National Confederation of Industry (CNI) according to which the output of factories fell in May for the fifth consecutive month, while the number of hours worked was 2.4% lower.

    The Costa Rica News (TCRN)

    San Jose, Costa Rica

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