World Cup Brazil 2014

Today, FIFA announced the countries which will host the World Cup of 2018 (Russia) and of 2022 (Qatar).

Inspired by that event, many people are searching for information about the World Cup 2014 in Brazil.

So, follows a  brief description of the situation as of today, December 2nd 2010:

The host cities were announced in May of 2009. FIFA and the Brazilian Federation chose 12 cities as hosts: Rio de Janeiro, Sao Paulo, Brasília, Belo Horizonte, Curitiba, Porto Alegre, Salvador, Recife, Fortaleza, Natal, Manaus and Cuiaba.

The first match of the Cup should be on June 13th 2014 (a Friday), and the final match on July 13th 2014 (a Sunday). It will be winter in Brazil, but weather will be fine in most of the cities.

Qualifyings haven’t started yet. Brazil is the only country with a secured place in 2014.

Nothing has been officially said about how tickets will be sold.

None of the twelve stadiums is not even close to being ready. It is not official yet, but it is certain that the final match of the Cup will be in Maracanã. São Paulo, the city with the best infrastructure in Brazil, will probably host the opening match (this assuming that this stadium will be ready by then; Morumbi is definitively ruled out).

While stadiums are delayed, the biggest concern is with the infrastructure, particularly the aiports; several organizations have issued warnings about the bottlenecks in Brazilian airports – see here, here and here.

FIFA and the Brazilian LOC say that they are confident that everything will be ready for 2014.

The buses systems of the main Brazilian cities are not reliable. In most cities, urban trains barely exist. The metro is the most reliable means of transportation, but the grid is not as comprehensive as they should.

Foreing tourists will probably have to resort to taxis. Brazilian taxi systems in the large cities are usually reasonably organized (much better organized than in South Africa).

Taxis are uniformly painted (in Rio, they are yellow with a blue band – see photo, but that isn’t a norm), and a (usually expensive) license is required – and the legal drivers don’t hesitate to weed out the illegal taxis.

Taxi Fares (in Portuguese, Tarifas de Taxi) have three components: a starting fare, a fare per kilometer and a fare per idle time (the latter starts counting as soon as the speed falls below a certain treshold); values vary from city to city.

A site was created to estimate Taxi Fares in the major Brazilian cities (including all host cities of the WC 2014). According to the authors, effort is made to keep the values updated.

Notice that during the night, weekends and, in most cities, all through the month of December, a special fare applies (in Portuguese, it is called Bandeira 2).

Notice also that in certain places, particularly airports and interstate bus terminals, the fare is fixed (depending only on the destination) and paid before boarding the vehicle.

Finding English speaking taxi drivers is an exception, rather than the norm. If you come across a driver who looks helpful and speaks languages, grab his card.

The site Copa 2014 published today information about the new Arena Corinthians Itaquera. The idea of building this arena is not new; there were notes about it a year ago and again a few months ago.

The difference now is that an actual project was presented to the President of Corinthians, by Architecture Office Castro Mello (who also projected the National Stadium in Brasilia).

Credit of Images: Castro Mello Arquitetos.

The venue of the World Cup in Sao Paulo is still undefined. Morumbi was supposed to be the venue, but Sao Paulo FC is not willing to make the necessary investments.

This new Arena would be built in the neighbourhood of Itaquera, in the Eastern end of the city of Sao Paulo, where Corinthians owns a large area. The stadium would have connection to the Corinthians station of the Metro, which would  help solve many accessibility problems faced by other stadia.

The stadium would have capacity of 55,000 seats. By installing retractable modules, the capacity could be expanded to 65,000, which would permit the stadium to host the opening match of the Cup.

Estimated cost is R$ 400 million (the estimated cost for renovation of Morumbi was R$ 650 million). The projects (including licenses) would take eight months, and the works would take two years.

According to Copa 2014, Grupo Advento would find the necessary fundings. In return, the group would have a share of the revenues from the stadium for a period of ten years – and after that, Corinthians would still receive R$ 200 million in cash.

If Corinthians can really obtain fundings, the project has very good chances to be approved by CBF.

FIFA and CBF have already declared that their main concern for the World Cup 2014 is with the airports.

Brazilian airports are already operating above capacity and, despite measures to attempt to speed up their building, we don’t know if the airports will be ready for 2014. Even if the airports are ready, we don’t know if there will be a sufficient supply of seats. And now, even if the airlines sell the tickets, we don’t know if they will actually transport the passenger.

Since last Sunday, August 1st, airline Gol has been delaying or canceling many of their flights. On Monday, more than 50% of the flights were affected; in Rio de Janeiro alone, out of 105 flights, 80 had been delayed and 11 had been canceled. On Tuesday, Infraero informed that Gol had delayed 203 and canceled 47 domestic flights. Today, Infraero informed that about 37% of domestic flights are still delayed.

Gol informed that the delays were “a reflex of the big increase in the volume of passengers, since last Friday” (last day of the winter break in Brazilian schools). According to sources, Gol pilots and crews had exceed the overtime work permitted by law, and refused to fly; besides, Gol had diverted aircrafts to more profitable charter flights, lacking aircrafts for normal routes.

Today, ANAC, the Civil Aviation Federal Agency, announced the punishment for Gol: a R$ 2 million (a bit more than US$ 1 million) fine.

So, a company sells tickets to thousands of passengers, fails to honor them, comes up with stupid excuses, and gets away paying a R$ 2 million fine (that is, if Gol ever pays that fine – it is well known that corporations in Brazil just ignore fines imposed by the Federal Agencies). No wonder the company doesn’t care about quality.

One could think that Gol’s competitors could take the opportunity to gain new clients. But it is no so. First, because the air transportation market in Brazil is dominated by a duopoly, Gol and TAM. And also because TAM is not any more reliable than Gol – massive TAM delays are also not very uncommon.

Probably CBF is right: the stadiums are delayed, but they can be built until 2014; changing the scenario of air transportation in Brazil will be much more difficult.

Natal is a city with nearly 1 million people, and is one of the hosts of 2014. With easy access from Europe and North America, and beautiful tropical beaches, it will probably be one of the most visited cities during the Cup.

The Brazilian Government has been announcing that there will be heavy investments in infrastructure to prepare the country for the World Cup, including US$ 12 bn in Information Technology investments.

However, it is very likely that users accustomed to high speed access in their home countries will feel the impact of the lower levels of services in Brazil. The Finnish (to whom a 1 MB connection is a basic right, rather than a commerciable service), or the Japanese (who since 2004 have been seeing 1 GB connection for US$ 38 per month), may feel they are back to the Paleolithic Era of internet.

Take, for example, this notice published yesterday, August 1st 2010, by newspaper Tribuna de Natal about broadband access in Natal.

There are only two providers of broaband access in Natal: Cabo Telecom (a cable TV operator) and Oi Velox (ran by Oi Brazil, which happens to be the worst telecom company in Brazil).

Below, prices charged by Cabo Telecom:

So, for a plan with up to 1 Mbps of download and up to 256 Kbps upload, subject to a monthly quota of 20 GB of transfer, the price is R$ 109.90 per month (a bit more than US$ 60 per month).

The broadest band Oi offers in Natal is 1 Mbps, costing 109.90 monthly, provided that the user buys a “promotion” package including voice services.

If the client is interested in data connection only (no voice), then the following table applies:

For most cities (including Natal), only 1 Mpbs is offered, at a cost of R$ 130 for configuration and R$ 123.30 monthly afterwards.

These are the the same options that businesses like hotels, LAN houses, shopping centers, etc have in Natal; that means that their services won’t be any better than their providers’ services.

For some cities, the improvement of internet access, along with a reduction in prices, could be one important legacy of the World Cup.

Matches of the World Cup 2014 will be staged in 12 cities dispersed all across the country. Given the long distances between the cities, most of the travelling within Brazil will be made by air.

The Brazilian Government is taking measures to improve Brazilian airports and bring them up to the levels required to attend the expected mass of travellers.

But, even if the Government fullfils the promises about the airports, another point remains: the Brazilian air carriers will have to expand their availability of air routes to provide timely transportation between cities.

According to latest statistics informed (April 2010, source ANAC), there are two companies which dominate the Brazilian domestic air transportation market: TAM (41.75% of market share) and Gol (41.44% of share); the third largest company was Webjet (6.02% market share) and fourth was Azul (5.36%).

Combined, TAM and Gol make a duopoly with more than 83% of market share, and about the same share of available seats. Let’s take a look at the routes operated by the companies.

Below, domestic routes operated by TAM and the companies which have commercial agreements with TAM (click the image to enlarge).

Below, domestic and international routes operated by Gol and Varig (Varig used to be the main Brazilian air carrier, but the company failed a few years ago and was purchased – along with the respective routes – by Gol).

The maps show that there is a big concentration of flights in a few cities, and scarcity in others.

The three main hubs in Brazil are: Sao Paulo, Rio de Janeiro and Brasilia. According to the Latin American and Caribbean Air Transport Association,  the route Rio – Sao Paulo is the busiest in Latin America, and Sao Paulo – Brasilia has just become the second one, surpassing the route Mexico City – Monterrey (see report).

Cities such as Curitiba, Porto Alegre, Recife, Salvador and Belo Horizonte are considered regional hubs, and are served by a few direct daily flights among them, and coming or going to a national hub. According to the same report mentioned above, Sao Paul0 – Porto Alegre and Sao Paulo – Curitiba are the fourth and fifth busiest air routes in Latin America.

The other host cities (namely Cuiaba, Manaus, Natal and Fortaleza) have just a couple of direct flights to hubs, and barely none flights amongst them.

FIFA and CBF will need to carefully study the logistics of air transportation in 2014 before defining groups, teams and matches of the World Cup.

If, for example, a popular team such as USA or England has a match in Manaus and the following in Cuiaba or Natal, there will certainly be a fight for tickets and a lot of passengers making connections in Brasilia or Recife.

Of course, if Brazilian air carriers increase investments, or the Brazilian Government allows international competition, the situation may change.

Does FIFA have more Power than the Brazilian Congress?

A first demonstration of power came in September of 2009, when FIFA requested to the Federal Government an extension of tax exemptions (Brazil Government had already agreed to exempt FIFA’s revenues, but FIFA said that, to host the Cup, ALL official partners should also be exempt); in May 2010, a law was approved to accommodate FIFA’s demands.

OK, in that case, the Government might say that there was a misunderstanding of the rules imposed by FIFA to all countries which apply to host the World Cup – Brazil knew the rules and should have complied with them from the start.

Then, in November of 2009, FIFA requested the city Government of Sao Paulo to change the Clean City law, so that FIFA’s partners could advertise in billboards near the stadiums (the law isn’t exclusive for those partners, but CBF already showed that will take action against ambush marketing – which means that only official partners would be allowed to adverrtise). The city of Sao Paulo (the only one in Brazil where such restrictive law exists) is still examining the matter.

Now, there is another case where the Brazilian legislation goes against FIFA interests.

Three days ago, a law was amended in Brazil to improve organization and increase safety of Sports events and fans. The law of amendment, in article 13a, reads:

“Article 13-A. These are requirements for access to and permanence in a sports venue, without prejudice of requirements determined by other laws:

II – not to bear objects, drinks or substances which are prohibited or are susceptible of generating or can possibilitate the practicing of acts of violence;”

That means that the law now prohibits alcoholic drinks in stadiums. Even before the law, CBF had already in 2008 signed a letter of compromise with the Public Prosecutors, to ban alcohol from the football matches.

Budweiser is one of the main partners of FIFA, and the corporation which owns Budweiser is also owner of the major Brazilian beer brands, such as Brahma, Skol and Antarctica (that means that Budweiser would sell lots of beer in the stadiums, if it was allowed).

Yesterday, Brazilian journalist Ancelmo Gois, who publishes a column at influential newspaper O Globo, and who is known for having good sources inside CBF and the Government, informed that “FIFA asked the suspension of the law of protection to Sports events, which Lula approved recently – the contract between FIFA and Budweiser demands that the beer is sold in stadiums during the World Cup”.

So, for FIFA to fullfil its obligations with Budweiser, the law must be suspended during the World Cup.

In Brazil, to “suspend a law”, another law is necessary.

It remains to be seen if FIFA will get that law.

Below, an official press release by the Brazilian Government (which, of course, must have an optmistic view), with links and comments in italic.

Brazil will invest US$ 18.7 billion in infrastructure to host the 2014 FIFA World Cup, according to Brazilian Minister of Sports Orlando Silva Jr. Speaking on a teleconference today, the Minister stated that these resources will fund 50 projects in 12 Brazilian host cities (the figure mentioned by the Minister today is the same announced a few months ago: R$ 33 bn in infrastructure alone).

Nearly 78 percent of funding will be allocated by the public sector, with the remainder coming from private sector sources (even though that figure is questionable, it is certain that most funding will come from public coffers).

While stating that “we have to work hard” over the coming four years, the Minister emphasized that “Brazil will be ready on time to host a great World Cup.”

“We will work in a timely and transparent manner to prepare Brazil for the World Cup and for the future,” said Minister Silva (according to FIFA, work is not in a timely manner). “We are focusing on sustainable development, which will not only result in Brazil successfully hosting the 2014 matches, but also improve the country for the Brazilian people.”

The projects discussed during the teleconference include investments of US$ 6.5 billion to improve urban mobility, including the development of monorail lines, subways, light rail transit systems, transit terminals and other modes of transportation. Some of these projects, the Minister noted, are already under construction.

Minister Silva also reaffirmed that all planned stadiums will be completed in time for the 2014 World Cup, noting that construction has already started for the stadiums in the cities of Manaus, Cuiaba, Natal, Salvador, Belo Horizonte and Brasilia (only in Salvador is there some significant progress; Brasilia started today; in Natal, the process was suspended for suspicion of overpricing).

The other six stadiums are currently under the bidding process (everything is moving  very slow).

In the hotel sector, the National Bank for Economic and Social Development has assigned US$ 556.0 million to finance new ventures or remodel hotels with better terms than the market. The resources will be expanded according to demand from the private sector.

To address the aviation demands posed by the mega-event, US$ 3.1 billion has been assigned to enhance 13 national airports. The federal government forecasts a 10 percent increase in traffic through Brazilian airports during the World Cup (and they are already saturated). Investment in ports will be US$ 426 million.

Under the scope of the federal government, an executive group was created to supervise all of Brazil’s preparations as host of World Cup 2014. This group includes representatives of the Office of the Chief of Staff and the ministries of Sports, Planning, Finance and Tourism. In addition, the 12 host cities signed a Responsibility Matrix, which defines the responsibilities of each federative party for the organization of the 2014 games.

The federal government forecasts that the 2014 World Cup will generate an additional US$ 104 billion in economic activity for Brazil through investment, tourism, an increase in household consumption, and the recycling of resources.

The investments for the World Cup 2014 will be made with public money.

In 2002, when Rio de Janeiro was chosen as host of the Pan American Games 2007, the estimated budget to prepare the city was R$ 409 million; in June 2007,  right before the opening of the Games, the actual cost was estimated in R$ 3.7 billion (see report here – the report was based on data provided by the National Accounting Office).

That means that the actual costs were nearly ten times higher than previously estimated. Lack of organization caused delays, which in turned resulted in several contracts without a bidding process. There were several suspicions of corruption.

Much because of this, in December of 2007, shortly after learning that Brazil would host the WC 2014, the Minister of Sports declared that there would not be public money to build the stadiums.

The implict idea was: stadium owners would have to look for private partners who, in exchange for the rights of usage of the stadium after the Cup, would bring money in to build or renovate the venues.

The problem, however, is that there are not private parties interested in investing in stadiums. The most notable case is Morumbi, which will probably be excluded from the Cup, because Sao Paulo FC can’t find investors.

Who comes to the rescue? The Bank for Social and Economic Development (Banco de Desenvolvimento Economica e Social), BNDES.

BNDES is a bank owned by the Federal Government. But it is not like Banco do Brasil, another giant State bank. BNDES doesn’t have street agencies, nor does it offer common bank services (such as current accounts, mutual funds, etc) to individuals.

All BNDES does is lending money to selected corporations, at low interest rates. BNDES charges the Long Term Interest Rate (TJLP – Taxa de Juros de Longo Prazo), defined by the Federal Government; currently, the TJLP is 6% per annum – see official values of TJLP. The Treasury borrows from the market paying a (target) interested rate called Selic; the Selic is always higher than the TJLP; today, the Selic is 10.75% per annum –  see official values of Selic. And if someone needs a loan from a bank, the interest rates in Brazil are the highest in the World.

This means that every time that BNDES loans money to someone, the bank is giving a subsidy to the borrower.

And where BNDES gets money to give away?

First, some of it comes from the return of previous loans (as explained above, this return is lower than any other option in the market). Next, by force of law, a part of taxes paid in Brazil goes towards Funds managed by BNDES – and we are talking of billions of dollars here.  And last, when even more money is needed, the Treasury transfers money to BNDES – this year alone, the Government transfered nearly US$ 100 billion to BNDES.

No wonder that BNDES have got so much money to loan. There were R$ 3.6 billion for public stadiums and R$ 1 billion for hotels (new hotels and renovation of old ones); private stadiums can’t get loans, but the contractors can (they received tens of billions in 2009); investments in technology, of course, will have their share from BNDES.

The investments for the World Cup 2014 will be made with public money.

The Government of Brasilia signed yesterday, after the due bidding process, the contract to build the new National Stadium.

The winner of the bidding process was the consortium formed by Andrade Gutierrez and Via Engenharia; the contract value is R$ 696 million (a little less than US$ 400 million). The Governor affirmed that Brasilia already has the cash needed to build the stadium, but is still considering to take a loan from the National Development Bank.

The National Stadium will be the new name of the current Mané Garrincha Stadium, with 40,000 seats, opened in 1974, which belongs to the Government of the Federal District of Brazil.

Mané Garrincha will go through a complete overhaul, but will not be completely demolished. The photos show images of the old Mané Garrincha and the New National Stadium.

The National Stadium will have 70,000 seats and will be one of the largest stadiums of the World Cup 2014; as such, the venue is claiming to be the stage of the opening and one of the semi-final matches of the event (Belo Horizonte, Porto Alegre and Sao Paulo are also interested in hosting those matches).

The cost, which is already of the highest among all stadiums in Brazil (second only to Maracana, which will cost R$ 720 million), will likely go even higher. First, because the cost doesn’t include the Telecom system – which will be planned only after FIFA defines which technology shall be used). And, if the Stadium is chosen to host the opening match, then it will need to have all seats covered – a demand by FIFA -, which will also have to be included in the price.

The works should be finished by December 2012, so that the stadium will be ready to be one of the venues of the Confederations Cup 2013.

When asked whether, given the lack of football tradition in Brasilia, the National Stadium won’t become a white elephant after the Cup, the Governor responded that “several companies have contacted us for partnerships, and the stadium will become an entertainment center after 2014″.