Economics & Implications of the World Cup – Achieving its Goal Event Recap

On Tuesday, May 20, 2014, the BABC of Greater Philadelphia hosted a world class panel featuring industry experts who discussed the Economics & Implications of the World Cup – Achieving its Goal in collaboration with the Chilean, German, Norwegian and Swedish Chambers of Commerce. Moderator Eric A. Zillmer, Psy.D., Director of Athletics, Pacifico Professor of Neuropsychology, Drexel University, and panelists: Matthew Alexy, Vice President and Director, Global Foreign Exchange, TD Securities (USA) LLC; Allen C. Koski, Vice President, Cigna Global Health Benefits; Nick Sakiewicz, CEO & Operating Partner, Philadelphia Union; and Rhett D. Workman, Managing Director, Government & Airport Affairs, American Airlines delivered a truly outstanding commentary on the world of soccer, transportation, commerce, and health, and how all of these components are related to the World Cup and the host country, Brazil. Hope Krebs, immediate prior BABC President and current Membership Co-Chair, welcomed guests and introduced Philadelphia’s Honorary Consul of Brazil, Paul Johnson. Paul represented the Brazilian Government, and briefly addressed the audience prior to kicking-off the panel.

Eric, who is now serving his 16th year as Director of Athletics at Drexel University, oversees all components of the athletics department, and is passionate about the subject. No one was more qualified or better equipped to lead this topical discussion. From the moment Eric took the microphone soccer fever hit the room. He laid the foundation for the fast paced conversation by explaining the numbers behind the event. The FIFA (Fédération Internationale de Football Association) 2014 World Cup begins on Thursday, June 12 and ends on Sunday, July 13, during which time, 32 teams will compete. Eric explained the magic behind the game:

It is simple. All that you need is a ball and goal. It is elegant, a dance among 22 players, part Samba part Cappuccino. It is a game of movement, angles, and opportunity. The world’s premier teams are thought of as Royalty. The rivalries between neighborhoods such as Manchester City and Manchester United or nations Germany and Italy are fierce. Everything and everyone stops to watch. Add the characters of the game … with names like Nani, Gabi, Kaka, Messi, Ronaldo, Riebri, and our own Philadelphia Union’s Fred and LeToux, well soccer at its best represents a Shakespeare inspired Opera on grass. With the drama on a world stage comes money, lots of it, power and politics even religion. And a lot of attention on Brazil!

Following Eric’s interactive and animated introduction, he literally got the ball rolling. Eric caught the speakers by surprise and tossed Nick a soccer ball to open the program with the first question. Nick lives and breathes soccer. He both played the game and has established a highly successful 23‐year career in professional sports team management, stadium/real estate development and motivational leadership. Nick joined Major League Soccer as a founding executive in 1995. Nick is responsible for creating an organizational culture and purpose that established one of the largest season ticket bases in the League. Although he now operates on the business side, rather than kicking a ball around on the field, Nick was quick as ever on his feet and fielded questions about predictions as to who was going to win the World Cup; the social, economic and political implications for the winning country; the best sports bars in Philadelphia where people can watch the games; and will a successful World Cup for the Unites States Men’s National Team change US soccer forever.

The conversation did not stop there – each panelist had ample playing time to discuss their area of expertise, fielding questions about healthcare, safety, transportation and currency factors – all tremendous influencers to the overall success of the World Cup. Allen, who joined CIGNA Global in 1990, and is Vice President, Eastern Region for CIGNA Global Health Benefits based in Wilmington, Delaware, enlightened guests about how travelers and their employees should prepare for a trip to the World Cup. He discussed the tourist medical infrastructure in Brazil and what we have learned in global mobility from previous big events like World Cups, the Olympics, etc. He addressed what might be challenging for this event in Brazil and how visitors should behave while in the host country. Allen provided the surprising statistic that only 3% of Americans have passports, a staggeringly low number when you think about all the foreign visitors the US receives each year. Allen’s parting advice to those traveling to the World Cup in Brazil was that each country has different governing customs and rules of conduct. When venturing abroad people need to remember that they are visitors in a foreign land and to heed his parents’ advice – “nothing good happens after midnight.”

Brazil is a big country, with infrastructure challenges, and large geographic distances between major cities. Rhett, who oversees American Airlines’ airport affairs in Asia, Canada, Europe and the company’s Corporate Real Estate, Facilities and Government Affairs portfolio in Pennsylvania spoke about transportation logistics and safety. American Airlines is a big player in the World Cup, serving nine out of the twelve host cities in Brazil. With new terminals opening in Sao Paulo and Rio there is tremendous growth and change in the transportation sector. Close coordination and contact between airports in different cities is imperative to ensure all safety measures are met and planes run on time. When asked about concerns regarding the travel experience for World Cup goers or any advice when travelling to Brazil Rhett said the most significant hurdles will be language and cultural barriers. Multi-language signage throughout the country but especially in places like airports and other transportation hubs is critical.

Infrastructure development and stability are of utmost importance and concern when hosting an event like the World Cup. Matt, who is responsible for managing the TD Bank’s Corporate Foreign Exchange relationships, spoke about the Brazilian economy and the country’s readiness to be player in the global economic arena.

In 2007 Brazil was one the fast growing economies in the world, its currency was strong, it had a current account surplus and vibrant export sector. The Bovespa was in enjoying the 5th year of what was to be a 6-year +800% rally. During the financial crisis the stock market there lost 3/5ths of its value for May to October of 2008. The markets recovered, of course. But it is interesting to note that the Bovepsa today in the summer of 2014 is at the same level it was back in the summer of 2007. Economic growth is slower at 2% compared to 6%, inflation is higher at 6% vs. 3%, and the currency is weaker. So the lead-up to the World Cup has not taken place in the most conducive of macroeconomic environments to say the least.

Some of the most important economic factors that need to be considered when participating in an event in a foreign country are regulation, the banking system and variability of the currency. The value of the Real has declined 20% since the matches in South Africa ended in July of 2010. Currency plays a significant role and is largely a function of each nation’s economic and fiscal situation in association with its specific monetary-policy regime. Brazil has the 7th largest economy in the world – similar in size to the UK. When asked what the economic impact of hosting the World Cup would be on the UK, and compare that to the impact the London Olympics had, and would there be a lasting effect, Matt answered:

In the near-term, I’m sure there will be pluses (spending on tickets, tourism and the like). We know, of course that there are mixed reports on infrastructure but these numbers were small in relation to the whole both in terms of potential and the global/domestic head-winds. Cost estimated to be $11.5B compared to South Africa $4B, and Germany $2.4B for stadiums and infrastructure, Brazil will incur $3.5B of Cup related debt. There will be minuses and substitution effects as well. The country will be focused on the Cup. Some economists have suggested that there will be a significant offset as workers stay home to enjoy the soccer. So gauging near-term direct impacts will be difficult and swings in data will be viewed as transitory in nature. The long-term impact of an elevated global status the nation currently enjoys and will hopefully continue build on is the big story. Let’s not forget that the Olympics (est. $15B) will be held in Rio in just two years. Once the CUP is over the financial markets will focus on the presidential elections this Fall.

This brings up another very important point – the political implications of the World Cup. Some argue the success or potential failures of the event will also be seen as a referendum on the President.

Clearly the social, economic and political trends within a country are deeply connected, and greatly influence the overall success of the World Cup. For some of the smaller, more developing nations, the winners and losers carry with them the social, political and economic stability of their nation. The World Cup is truly the global celebration of sport, and the impact is long lasting.

After more than hour after “kick-off,” the soccer ball stood still. The fast paced, dynamic discussion about the business side of soccer and how the sport can change the world was concluded with questions from the audience, and a raffle prize drawing for two round trip travel vouchers from American Airlines; Philadelphia Union branded gear; Philadelphia Union game tickets; and a bottle of Chardonnay. The event ended with networking, enjoying delicious food at the beautiful Morris’ Café, catered by Stephen Starr, and standing for photos with four Philadelphia Union players: Chris Albright – Former Union defender, Member of the 2006 US World Cup team in Germany; Amobi Okugo – Union Defender, member of US Youth National Teams at multiple levels; Fred – Union midfielder, Native of Brazil (host of the 2014 World Cup); and Vincent Nogueira – Union Midfielder, Native of France.

Special thanks to sponsors: American Airlines, Cigna, Duane Morris LLP, Philadelphia Sports Congress and TD Bank.

Click here to view photos from the event

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