World Cup Brazil 2014

Does FIFA have more Power than the Brazilian Congress?

In September 2009, FIFA requested to the Federal Government an extension of tax exemptions; in May 2010, a law was approved to accommodate FIFA’s demands.

OK, in that case, the Government may 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 obeyed them from the start.

In November of 2009, several newspapers in Brazil informed that FIFA requested the city Government of Sao Paulo to change the Clean City law, so that FIFA and CBF’s partners can advertise near the stadiums (the law isn’t exclusive for those partners, but CBF already showed that will take action against ambush marketing). 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.

The problem is that 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.

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”.

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″.

When cities were applying to FIFA and CBF to be a host of games in the World Cup 2014, all they had to present was an artistic design of the future stadiums (besides, of course, evidences that the city would be financially capable of building the stadium and implementing all the necessary urban infrastructure).

Based on such artistic designs, FIFA and CBF elected the twelve host cities of 2014.

Now, the cities have to produce not only artistic, but actual projects. As all the twelve stadiums  will have to be built or rebuilt, all the stadium owners  had to contract archictecture and design firms to work on the real project.

According to the Portal Transparency of the Cup 2014, the prices of the Projects are:

A comprehensive Project involves researching, planning and implementing all aspects of infrastructure, illumination,  acoustic, waste treatment, urban legislation, accessibility, environment and more.

This broad reach of tasks could be a explanation for such a wide variation in the estimated cost of projects; however, there may be also other reasons.

Yesterday, for example, the Government of Natal cancelled the contracts with the firms hired to design the Arena das Dunas Complex. The reason was that the Public Procurement found the cost of R$ 27 millions to be excessive, and demanded explanations.

The explanation of the Natal Local Committee was that the project was chartered to the same firm which had prepared the artistic design, and hence, “there would no need for a bidding process”. The absence of competition, of course, permitted the architecture office to skyrocket their prices. The Local Committee realized that their position was unbearable, and decided to cancel the contract.

At least in this case, some public money was saved, but Natal is now running the serious risk of being ruled out of the World Cup.

Since it first leaked to the media, the World Cup 2014 logo has been receiving bad criticisms in Brazil.

This week, the Brazilian Association of Designers issued an open letter called World Cup 2014: a wasted opportunity?

This article is interesting because, supposedly, represents a technical opinion by the Brazilian professional designers (the letter is signed by João de Souza Leite, a Director of the Association, also Professor of Design at respected PUC-Rio); besides, examples are provided of what could be considered a good design.

Below, some non-literal translated excerpts of the message:

An event such as the World Cup is an unparalleled opportunity for the host country to demonstrate some of its more significant values and skills.  The World Cup 2014 can make visible our in design, implementation, realization.

In other big events in the past, hosts took the opportunities to expose the culture, make experiments and look even beyond the limits of the events.

For example, in the Olympic Games of Sidney in 2000, Australians elected eco-sustainability as one their main values; and the infrastructure of the venues and city showed it.

In the Olympics of 1964, the signs created by the Japanese – pictograms that overcame the language barrier through the use of meaningful images accessible by any citizen of the planet – set a parameter for all communication to be implemented in similar situations, airports hotels, large areas of the congressional stadiums.

Good logos also incorporate traces of a National image. The logo designed by Josep Trias for the Olympics in Barcelona echoes the language of Joan Miró and Pablo Picasso, reinforcing the cultural origin of the symbol. The logo adopted by the Americans for the World Cup 1994 is a direct reference to the American flag.

The logo presented for the World Cup 2014 seems to be in opposition to all these values.

The judging commission can’t be blamed; their members are not used to think about such values – that’s not their jobs.

The logo of the World Cup 2014 is rough and unfinished. Its basic concept- multiple hands taking hold of a ball or a CUP – is open to questioning, since that should not be its primary goal . It is unfinished because of the inadequacy of the design, which sits somewhere between the comic and ironic, with unnecessary details to delineate the shape – the use of shadows in the hands is the most basic of the resources available in graphics software design.

The form of letters, what to say? The typographic tradition started in the 15th century indicates that the shape of the letter always carries some sort of meaning. The 2014 Logo only shows a certain inability in writing, something childish.

Besides, the lack of a reference basis causes a lack of vertical support, keeping it in precarious balance.

By presenting this Logo, we are showing to the World an enormous incapability to work with project and design of symbols.

See full original text.

Brazilian newspaper Valor (the best business newspaper in Brazil) published an article today July 21st 2010 (for subscribers only) about the investments which will be made in the IT (Information Technology) and Telecom sectors to prepare the country for the World Cup 2014.

According to the article, Brazil will invest a total of R$ 21.3 bn (about  US$ 12 bn, at current exchange rate) in infrastructure, to upgrade internet backbones (fiber optics, routers, computers, etc), fixed and mobile telecommunications (expansion in the number of lines and upgrade to new technologies), building of new datacenters, etc.

The article also estimates that total investment in infrastructure will be around R$ 143 bn.

This amount reflects two factors: the big increase in demand for connections during June and July of 2014 and the current bad quality of Brazilian Telecom companies.

The days of major events of the World Cup (such as open and final games) should register record number of phone calls and internet connections. In the opening of the Olympic Games 2008 in Beijing, there were 220,000 simultaneous calls and connections; today, the entire city of Sao Paulo, the busiest in Brazil, registers between 60 and 80,000 simultaneous connections.

Governments and private companies will have a challenge: to provide this massive availability of services during the Cup, without having to deal with a  large unused legacy after the event. A few months ago, the Federal Government passed a law to recreate Telebras (the former holding company  of the State owned phone companies) and charge it with the job of creating and deploying, until 2014, a National Broadband Plan.

The articles makes indirect references to the current low quality of Brazilian Telecom services. “In 2014, tourists will bring their 4G cellular phones, and we will have to be ready to offer them this service”, declared the director of a Telecom.

Brazilians are still getting used to 3G, which operators still advertise as “the newest marvel in mobile technology”; there is no mention of commercial 4G in Brazil.

Service for 3G is expensive. The table below shows prices charged early this year (January 2010)  by Vivo, the largest 3G operator in Brazil; a direct link was not placed because operators seem to hide their price tables – the prices were quoted from this site.

Notice that there is a promotional price for the first 3 months, then normal prices apply (a trick to bind clients to a long term contract). Packages start with an allowance of 50 MB per month, and go all the way to unlimited plans – however, Vivo and all other operators put in the contract that, if the traffic of your “unlimited plan” goes beyond a certain level, Vivo will restrict the data transfer rate.

Besides Vivo, the other major operators of telecom in Brazil are Oi Telecom (the biggest one, if we include fixed and mobile lines, but nonetheless the worst company of all), Claro and TIM.

The Brazilian coast is nearly 8,000 km (5,000 miles) long, the best part of which in the tropical zone; several Brazilian capitals are located by the sea. The country seems to have potential to be a popular destination of cruises.

However, by visiting the sites of the biggest and most popular cruise operators, such as Royal Caribbean, Carnival Lines,  Princess and Norwegian,  one notices that there are few options, if any at all, of cruises to Brazil.

There are a few explanations for such. The most important reason is that, until 1995, only national flag ships could sail between Brazilian ports. Until then, most international cruise operators stayed away from Brazil; the only company which registered ships in Brazil was Italian Costa Cruises, which dominated the Brazilian market for decades.

Since 1995, other cruisers have slowly started to come to Brazil, but they face two big problems: Brazilians (except for a small elite) are not used to cruises, and the ports are not prepared to receive big crowds.

This situation, however, is likely to change until 2014.

The main reason is that cruises will be used as accommodation. Hotels are being built, but not in enough numbers to accommodate all visitors during the peak moments of the World Cup. In big events such as Carnival and New Year in Rio, it is already common to see tourists staying in cruisers, instead of hotels.

Besides, it is expected that, with the massive exposition of Brazil in the media, tourists will be more interested in destinations such as Fernando de Noronha, Natal, Fortaleza and others, and the operators will start to offer more packages to Brazil.

A few weeks ago, FIFA manifested preoccupation with the delays in the works for the World Cup 2014. The Brazilian Local Committee started an auditing in all host cities, to check out how the works in the stadiums were going.

However, as the Minister of Tourism recently declared, even more than stadiums, the concern is with airports. Stadiums can be shut down during refurbishment, and more money can be pumped into them to speed up the works; however, in airports (most of which are already working above capacity), any move which impacts the existing flow of passengers must be carefully planned.

The Brazilian Government acknowledged the problem, and issue the Provisional Measure 489 – MP 489 – see ful text here (in Brazil, a MP must be confirmed by the Congress, but it is enforced as law since its publishing by the President of the Republic) allowing to Infraero more flexibility to hire contractors.

The MP also created the Olympic Public Authority (APO), a body whose goal is to guarantee tha Brazil and Rio will comply with the demands of the Olympic Committe regarding the Olympic Games of 2016. Article 11 of the MP determines that all biddings related to the APO and to the infrastructure of airports necessary to the realization of the World Cup 2014 shall be regulated by the MP.

The two main changes are: electronic auctions (bids are made over the internet) are now allowed; the bidded price will be ranked first, and only afterwards will the technical and financial qualifications of bidders be evaluated.

According to Infraero, the new legislation “will permit faster bidding process, will alllow fewer appeals to bidders, and will lead to faster conclusion of works”.

Some specialists, however, say that the MP is illegal. For them, the flexibilization of the bidding law is allowed only in cases of emergency or perils, and not in situations caused by the omission of the Government.

In 2007, Rio hosted the Pan American Games. The initial estimative was that the event would cost US$ 200 millions in infrastructure; a few months before the Games, the works were delayed, there were also changes in the bidding process; as a result, the final cost shot up to more than US$ 2 billion (see here and here).

Anyhow, despite the controversies, Infraero can now try to speed up the building and refurbishing of airports.

CBF, the Brazilian Football Confederation, will file lawsuits against several Brazilian corporations for the practice of  ambush marketing, “a marketing campaign that takes place around an event but does not involve payment of a sponsorship fee to the event”; the event, in this case, is the World Cup 2010.

On May 26th, it was announced that CBF would start action against Claro, TIM, Café Pelé, Banco Votorantim, GM, Mastercard,  Hyundai, MRV Engenharia, Samsung, Walmart, Ipiranga, ALE, Ponto Frio, Ricardo Eletro, Casas Bahia, Diário de S. Paulo, Magazine Luiza (all these companies are multi-million or multi-billion dollar companies),  Noova Produtos Promocionais, Ponto Inicial Brindes, The Leadership Group, Chevrolet Américas Barra, Prensa Popular, Definitive 1 and Perfumaria Ribeiro Box.

Today, June 2nd, the following companies, all big corporations, were added to the list: Caixa Econômica Federal, Aguardente Ypioca, Telefônica, Olympikus e Supermercado Guanabara.

These companies, in their marketing campaigns, made references to the expression “World Cup”, and/or exhibited someone wearing the Brazilian uniform. Below, a movie in which Robinho advertises a Volkswagen car:

Several of the above companies are direct competitors of the official sponsors of the Brazilian team; FIFA and CBF claim they have to take strong measures to protect the interests of such sponsors.

This kind of action is unheard of in Brazil until recently. In November of 2009, FIFA lawyers started sending warning letters to companies using the trademark World Cup (by then, FIFA had already registered nearly 30 expressions, marks and logos with INPI, the Brazilian Institute for Intellectual Property).

The outcome of such suits is still hard to predict – but they will certainly establish a jurisprudence for the World Cup 2014.