How might the FIFA World Cup impact on the economy?
Irene Campos, deputy director general at the Spanish eafi Inverdif comments on the similarities she perceives between the Economy and the World Cup just a few days before the tournament’s final.
“All countries worldwide follow passionately the sport competition regardless their team has been eliminated or not. Economy also raises global attention, although not such a passionate interest.”
Possibly, the World Cup has been found traditionally to have all kinds of effects on financial markets, with events on the pitch shaping the moods of those in the trading pits.
According Campos, when any country is playing, its stock exchange sees its trading activity dropping, leading to a flatter market.
Conversely, she highlights how the competition also makes the host country to invest a big amount of money in infrastructures which, normally, benefits that country.
Campos adds: “The World Cup is a boost for tourism too, usually prolonged over time.
“Lately, some emerging countries including South Africa, Brazil, Russia, and Qatar (in 2022) have been the countries showing the most interest in hosting the football tournament. They take advantage of their economic potential to host the event which, generally, has a greater impact on their economies than the Olympic Games. It is increasingly difficult to find cities interested in hosting the Olympic Games because of the debt they generate.”
Emerging countries are subject to study of the Theory of Convergence, which is an economic theory speculating that poorer economies will tend to grow more rapidly than wealthier economies, so all economies in time will converge in terms of per capita income. Poorer economies will literally “catch-up” to the more robust economies.
Melanie Krause and Stefan Szymanski point out in their study “Convergence vs. the Middle Income Trap: The Case of Global Soccer” how the Theory of the Convergence is reflected in football, since the “weakest” football teams have shortened distance with the strongest over the past few decades.
And from the point of view of advisory, football and economy have parallelisms too.”As every fan believes that can be a coach, every investor believes can fulfill financial advisers’ tasks.
“However, both managing a portfolio as leading a football team are very complex tasks that require specific knowledge, experience and resources within the reach of the best professionals,” Campos concludes.
