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Is Brazil's economy as strong as its soccer team?

Part 4
Is Brazil's economy as strong as its soccer team? (Part 4 of 7)

Why Brazilians protest instead of celebrating the 2014 World Cup

FIFA World Cup 2014

Brazil is host to the FIFA World Cup 2014. In the most soccer-crazed country of the world, where Pelé will always remain a national icon, the enthusiasm for the game is always up—though the economy may be down. Brazil is a place where everybody seems to be in love with soccer. We can gauge the extent of this enthusiasm in the case of the village of Suruaca, on the fringes of the Amazon rainforest. With a population of just 450 people, the village manages to support two fiercely competitive soccer clubs.

Inflation, consumer prices for BrazilEnlarge Graph

Protests against the World Cup

However, the enthusiasm for the game across the country, including the favelas or slums of Rio de Janeiro, which abound in pick-up games, has met with a series of protests over the government’s expenses for the World Cup.

The slump in economic growth post-2010 in Brazil has spurred a series of protests from local people, who are angry about the debt-laden government’s massive expenses for the World Cup. Tournaments such as the World Cup and the Olympics tend to be a drain for host countries at the best of times due to their steep costs. Consequently, the impact on Brazil’s economy and stock market has been negative.

Stock market reaction

The Bovespa index, which represents the Brazilian stock market, has already declined by close to 1.5%, from 55,102.44 on June 12 to 54,299.95 on June 17. During the same period, the iShares MSCI Brazil Capped (EWZ), which measures broad-based equity market performance in Brazil and has holdings in top companies like Itau Unibanco Holding S.A (ITUB) and Ambev SA (ABEV), declined by 2.6%. ItauUnibanco Holding S.A (ITUB), a provider of financial products and services in Brazil, happens to be one of the national supporters for the World Cup, along with sponsors like Coca-Cola (KO) and Visa Inc. (V).

To understand what’s driving the Brazilian public to protest on the streets instead of cheering at the stadiums, read on to the next part of this series.

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