Qatar invested more than $200 billion to organize the 2022 FIFA World Cup. But history shows that organizing major sporting events does not bring great rewards from an economic point of view. In fact, they even cause losses. However, for the organizing countries, there is another dimension that surpasses the financial element: collecting geopolitical dividends.
The numbers don’t deny it. Since the 1966 World Cup, played in England, only one tournament has generated more revenue than expenses. Russia 2018 had a positive balance of around $240 million, according to the study “The structural deficit of the Olympics and the World Cup: Comparing costs against revenues over time”, authored by Martin Müller et al.
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To date, the World Cup that recorded the biggest deficit was Japan/South Korea, organized in 2002: -$4.81 billion (at current prices). But Qatar 2022 will far surpass that mark, taking into account the huge Qatari investment to organize one of the most controversial World Cups to date.
Why, Qatar?
For a nation like Qatar, organizing the World Cup goes beyond economic rationality. Between two superpowers of the Persian Gulf such as Saudi Arabia and Iran, Qatar strives to show itself to the world as a great, modern and open country, despite its small territorial size, its 3 million inhabitants and the enormous path it still has to go through the chapter on human rights.
Therefore, there are those who see this World Cup as a way for Qatar to “wash” its image (it is important to remember that it still owns the French team PSG, owned by Neymar and Messi). It is a practice known as “sportswashing”. It has already been used on other occasions that have become, in some cases, historic, such as the Berlin Olympic Games in 1936, during Nazi Germany, or the World Cup in Argentina in 1978, during the military dictatorship.
For example, in this Argentine World Cup, the country recognized a loss of $1.74 billion, but the loss was largely offset by the political gains of Jorge Videla's regime.
The most expensive Cups
Let's go back to the present: Qatar, a country rich in natural gas, invested around $220 billion for this World Cup, which is by far the most expensive ever organized. We are unlikely to see this level of investment in the future.
Previously, the most expensive World Cup was held by Japan/South Korea, which spent more than $7 billion in 2002.
For this accounting, the authors of the study consider two types of costs: construction/renovation of stadiums and organization. On the revenue side, tickets, sponsorships and television rights are counted, which, in the case of the Japanese/South Korean event, resulted in just over $2 billion for the coffers.
Still, it is easy to see that the authors forget an important aspect: the impact on the economy that results from tourist consumption in travel, hotels, restaurants. In other words, everything associated with the tourism industry. But not just during the month of competition. It is also after the test is over, due to media exposure (although more difficult to calculate).
Then, with investment in local infrastructure, such as transport networks and accessibility, residents also benefit from better living conditions in their cities.
However, the authors also consider that the figures presented may not correspond to reality and may be underestimated in terms of costs and overestimated in terms of revenue.
From “big busts” to “cash cows”
In any case, the conclusion of the study is clear: the World Cup hardly pays the costs of its organization. And this also happens during the Olympic Games.
Among the big busts that the authors identify in the study we find the Sochi Winter Olympics (2014), the London Olympics (2012) and Athens (2004) as the biggest financial fiascos. Next comes the Japan/South Korea Cup (2002), Montreal Olympics (1976) and the South African Cup (2010).
But for those who think that a mega sporting event can represent a “cash cow”, it is better to remove the “cash cow”. Only Russia (2018), Brazil (2014) and the Rio Olympic Games (2016) achieved breakeven. Most were really big busts or small tragedies.
Lesson for the future?
For the authors, if the World Cup had been organized by FIFA alone, it would have gone bankrupt a long time ago. Additionally, if the biggest sports tournament in the world is held every 4 years, it is because Governments subsidize (at the expense of taxpayers' taxes) the construction of stadiums.
If history shows that organizing major sporting events does not bring much direct return, it also tells us that countries pay little attention to this. Year after year they are organized all over the world, regardless of the final objective.
The next Olympic Games will be held in Paris, in less than two years. The next World Cup will be organized by the USA, Canada and Mexico and there is no shortage of candidates to host the next World Cups.
How to prevent history from repeating itself? Reuse stadiums as much as possible.