Ronaldo, slivovitz and World Cup economics

November 24, 2013
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Portugal's forward Cristiano Ronaldo reacts after scoring at the Friends Arena in Solna, near Stockholm on November 19, 2013 during the FIFA 2014 World Cup playoff football match Sweden vs Portugal/AFP
Portugal’s forward Cristiano Ronaldo reacts after scoring at the Friends Arena in Solna, near Stockholm on November 19, 2013 during the FIFA 2014 World Cup playoff football match Sweden vs Portugal/AFP

, PARIS, Nov 24 – When Cristiano Ronaldo completed his stunning hat trick against Sweden last week, he didn’t just book Portugal’s place at next year’s World Cup in Brazil.

He also had the heads of his country’s national airline, travel agents and main television station punching the air as they contemplated a massive boost from a tournament in the spiritual home of football.

As the former colonial power, Portugal has myriad business, cultural and sporting links with emerging economic heavyweight Brazil, to whom it bequeathed its language.

For a small, under pressure economy like Portugal’s, World Cup qualification is the kind of thing that can make a difference.

The broader, macroeconomic benefits of the boost to national morale are not easy to quantify but, in certain sectors, the Ronaldo effect goes straight to the bottom line.

Just ask Goncalo Rebelo de Almeida, a board member at Vila Gale, a Portuguese hotel group that generates 40 percent of sales in Brazil.

“The Portuguese who head for Brazil to watch the World Cup are going to prefer a hotel they know,” Almeida says with relish.

For troubled national air carrier TAP, which flies more people to Brazil than any other European airline, a World Cup hosted by the five-time winners with Portugal included is manna from heaven.

Executives have already decided to bring forward the opening of new routes between Lisbon and Brazil’s northern cities of Belem and Manaus by one month to the beginning of June, a fortnight before the big kick-off.

Similar bonanzas are being anticipated by public broadcaster RPT, which gambled heavily on Ronaldo’s talent when it shelled out for the broadcasting rights to Brazil, and the Seleccao (national squad)’s principal sponsors.

They include brewer Sagres, the BES bank and TMN, the mobile arm of Portugal Telecom, which has recently merged with Brazilian operator Oi.

Not a football country

Experts in France have poured cold water on suggestions that the national team, Les Bleus’ stirring comeback against Ukraine in their qualifying play off will provide the country’s stagnating economy with the shot of adrenaline it so badly needs.

But France is a big economy, by definition much harder to turn around, and, as Manchester United legend Eric Cantona is fond of reminding his compatriots, it is also not a country that lives and breathes football.

That cannot be said of Portugal or of Croatia, which also came through a play off last week, joining Greece in the group of four countries to claim the final tickets from Europe to Brazil.

The high stakes involved for Croatia’s services based economy were underlined by a headline in newspaper Vecernji List: “(Coach) Niko Kovac can pull Croatia out of recession.”

On the evidence of Croatia’s latest appearances at major football tournaments, economists expect each match played by Kovac’s squad in Brazil to deliver a 50 million euro boost to national GDP: that may not sound like that much, but for Croatia the three guaranteed matches at the finals will add around 0.35 percent to annual economic output.

In Portugal you can call it the Ronaldo ripple. In Croatia it is more of a “slivovitz” effect: fans can be guaranteed to toast a victory or drown their sorrows with the fiery national drink and most of them will do it on the terrace of cafes which are counting on a 30 percent surge in business during the tournament.

“Anyone who has a cafe in Croatia gave a double cheer when we qualified firstly as fans and secondly as businessmen,” said Dean Barac, who has two bars on the Adriatic coast.

“I’ve got a big screen TV in my cafe but just now I cannot attract anyone with it,” he told AFP. “For Brazil I’ll have to upgrade the equipment because the matches will be played during the day and we’ll need better resolution.

“As long as Croatia gets to the second round, the investment will be worth it. Croatians love to spend after a victory.”

France made football history by overturning a 0-2 first leg deficit to Ukraine to clinch their place in the finals, but even those heroics are expected to make little difference to Europe’s second biggest economy.

“Elimination would have dampened the current climate still further but it doesn’t follow that qualification will restore the economy’s sparkle,” says Marc Touati of economic consultancy ACDEFI.

“The French reality of very high unemployment, non-existent growth and strong fiscal pressure remains the same.”

A boost to the national brand

For all its current problems, France has greater reserves of wealth than its fellow play off winners and the upmarket travel sector has already been rewarded for Franck Ribery and co.’s heroics at the Stade de France.

“Our World Cup newsletter went from 3,000 to 5,000 subscribers in the morning after the match,” said Jean Francois Rial, the CEO of travel agent Voyageurs du Monde, which has the French rights to sell official hospitality packages for the World Cup.

But the size of the French economy means a boon for a handful of companies is unlikely to make a difference overall.

“If football created growth, Spain would be the richest country in Europe,” Pascal Perri, the economics expert of RMC Sports radio, noted with a wry smile.

For smaller countries there is also the boost to the national brand that comes with qualification, according to Gregory Papanikos, a Greek who is honorary economics professor at Stirling University in Scotland.

“For a non-host country, the chief benefit is fame,” Papanikos said. “If properly exploited (Greece’s participation in Brazil 2014) will have a positive effect on tourism. The country gains exposure abroad.”

He believes Greek travel agents will be busy if Greece gets past the first round but he cautioned against investing in TV companies. “Don’t forget that many Greeks will turn off the TV set if the team is 3-0 down.”

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