Navigating Brazil’s stadium management minefield

Published 20 December 2013 | Authored by: Poonam Majithia

On 5 December 2013, FIFA announced that six of Brazil’s twelve World Cup stadiums would not be ready in time for the 31 December deadline. Completion of several will be delayed until January or February but work on the Itaquerão stadium in Sao Paulo may not be finished until mid-April, just two months before it is supposed to host the opening game.

The six that are completed had to be ready in time for the Confederations Cup last summer but several of those also experienced similar delays in the run up to that tournament. This is despite the fact that Brazil has spent £2 billion ($3.5 billion) on the stadiums, three times more than South Africa did for the 2010 tournament. This post explores some of the legal and organisational issues that have played a part in the delays and which may continue to affect the viability of the stadiums after the World Cup is over.


Politics

To begin with, the process of deciding which cities were going to be host cities was unnecessarily lengthy as it was marred by politics. Brazil felt that it was important to show that all regions were going to be represented so decided on having twelve host cities as opposed to a more manageable ten. This was quite a challenge to set given that, according to a FIFA inspection, none of these cities already had stadiums which were suitable for hosting a World Cup game1. Moreover, some of the cities chosen, such as Manaus in the Amazon, Cuiaba in the Pantanal and Brasilia, don't traditionally have a large football following, leaving their stadiums at risk of becoming white elephants after the World Cup is over. For example, the Amazonia stadium will have a capacity of 44,000 but the local football team is a fourth division team which is lucky if it attracts an attendance of 1,000, making the stadium completely unviable. In Brasilia, it is expected that only 30% of the 70,000 seat Estadio Nacional Mané Garrincha's revenues will come from football matches, compared to the Maracanã or the Itaquerão where the figure stands at around 80%2.

Once the host cities were decided, companies had to endure Brazil's bureaucratic public tender process to win contracts for the construction of the stadiums. This, coupled with the amount of time to decide on the host cities, meant that construction did not begin until around three years before the World Cup start date. Construction companies complained that public officials did not have the requisite skills to effectively manage such a complicated tender process and that draconian requirements demonstrated that they did not understand the most important aspects of stadium construction3.


Workers' strikes and corruption

Since work on the stadiums began, further delays have been caused by workers going on strike or state tribunals suspending work due to safety measures not being complied with. On 14 December a worker died after falling off the roof of the Amazonia stadium; work was subsequently suspended by a judge who cited that there were 114 pieces of evidence that safety rules were not being adhered to4. Just two weeks prior, two workers died from accidents at the Itaquerão, suspending works there5. Those stories made international headlines but these problems have been occurring for many years. In 2011, 1,500 construction workers went on strike at the Maracanã following an on-site explosion which left one worker seriously injured6. Workers at the Beira-Rio stadium went on strike in Rio Grande do Sul in January 2013 due to a pay dispute7. This is just the tip of the iceberg; in all several weeks, and in some cases months, of delays can be attributed to these strikes and suspensions.

Of course another problem with the construction of the stadiums, given that they are under public control, is that they are susceptible to corruption. Since construction began, the Tribunal Contas da União (TCU), the Federal Auditor, has investigated several cases of irregularities being found in the public spending on stadiums; it is currently investigating the Ministry of Sport and the Brazilian Development Bank (BNDES) of improperly using funds allocated for the work on the Maracanã and the Itaipava Arena Pernambuco in Recife8. Work on the Arena da Baixada in Curitiba was delayed in July after funds from the BNDES were suspended after the Paraná state Tribunal da Contas found irregularities there9. The spending in Manaus, Fortaleza and Natal are also being investigated; this takes the count of Stadiums affected by delays, due to improper use of funds and suspensions from judicial investigations, to at least half.


The role of FIFA

Although Brazil accepts that theses issues have played a part in the delays and problems in relation to constructing the stadiums, they lament that FIFA should also be held responsible. It was FIFA that asked for stadiums to have a minimum capacity of 40,000 leading to the construction of some unfeasible stadiums and extra expenses for temporary seating in others10.

In 2009, each stadium owner signed a stadium agreement11 with FIFA detailing its obligations in relation to the World Cup and, where applicable, the Confederations Cup and the terms and conditions under which it would fulfil those obligations. The agreement strongly favours FIFA; clause 2.3 allows FIFA to amend its requirements and impose additional requirements at its sole discretion and clause 8.3 states that all the costs associated with the obligations must be borne by the stadium owner. FIFA also exclude themselves from any liability (clause 9.18). It is also possible that clause 8.4, which prevents commercial entities from associating itself with the stadiums or promoting their role in connection with investment in the stadiums, deterred the private investors that Brazil had hoped for.

Many of those involved in the construction of the stadiums, including the various Brazilian authorities, argue that these onerous demands have exacerbated the problems. For example, the Minister of Communications, Paulo Bernardo was concerned with the cost of meeting FIFA's ever changing telecommunications requirements which have expanded considerably due to the growth of social media and smartphones over the past few years12.

On 2 September 2013, the Ministerio Público Federal, Brazil's Federal Prosecutor's Office, announced that it was seeking an injunction against FIFA to block the use of public funds to pay for temporary infrastructure, such as tents, cabling and communication equipment for broadcasters. They argue that such costs will not serve in the public interest and will not leave a legacy for the Brazilian people13. FIFA have hit back saying that liability for such costs is to be borne by the stadium owners as clearly set out in the stadium agreement14.

 

Public money and public control

In 2007 the Brazilian government promised that all investment for the construction of stadiums will come from private investors whilst public money will be used on projects to improve transport and infrastructure in the host cities. Fast forward six years and it is estimated that 91% of the money spent on stadiums has come from the public purse15. As a result, transport and infrastructure projects have come to a halt with only three of the planned 45 transport projects actually having been completed16.

This public investment has come in several forms. Firstly, five of the stadiums are owned by the state in which the relevant host city is located; another three are owned by a public-private partnership (PPP) formed between the relevant state government and a private company. Therefore, only three of the stadiums are owned privately by a football club. Almost all of the stadiums, including those that are privately-owned, have received funding from the federally owned Brazilian Development Bank (BNDES) which has provided loans with interest rates subsidised by the federal government.

Once the World Cup is over, the state governments which own stadiums will be responsible for their maintenance and the TCU estimates that at least four stadiums will be unlikely to fund basic maintenance requirements17. Although some of the loans will be repaid through revenue from future ticket sales and naming rights, the likelihood of it all being paid off looks slim, meaning that the costs will be absorbed into federal and state level public debt. A study conducted by Brunoro Sport Business indicates that it could take state governments between 33 to 198 years before they fully recuperate the costs spent on constructing a stadium.

 

The bumpy road ahead

One of the ways in which state governments are looking to reduce future costs is by giving responsibility of running the stadiums to private operators. Bidders would be invited to bid for the rights by presenting a proposal at a tender. The winning bidder would then sign an agreement for a limited number of years and pay the state government a certain amount for the rights to operate and develop the stadium. They would then be able to develop the stadium as specified in their proposal and hope to make a profit.

The management of stadiums by external operators is quite common at European grounds; however such proposals have been causing a stir in Brazil. Earlier this year, the Rio de Janeiro state government signed an agreement with a consortium consisting of Odebrecht, AEG and IMX, after they won the tender to operate the Maracanã for 35 years. This caused uproar in Brazil leading to public protests. Fans were outraged at the possibility of increased ticket prices and the demolition of nearby athletics and swimming facilities for the construction of a car park and shopping mall18. To the fans' defence, the consortium began selling some tickets at R$300 (£80 or $130)19 resulting in many empty seats. The Ministerio Público Estadual (the State Prosecutor) also suspended the auction process to investigate the legality of demolishing the sports facilities and allegations of preferential treatment to the winning consortium20.

It is clear from these events that Brazil still has some advances to make before it can fully commercialise its stadiums in the same way that owners and operators do in Europe. Given the amount of money that Brazil has already spent on the stadiums as well as the problems the country has experienced from public and FIFA intervention, a more sophisticated and organised management system needs to be developed in order to ensure that these stadiums do not become the white elephants that everybody is expecting them to be.

 


 

 

1.UKTI Guide, “Infrastructure Opportunities in Brazil: FIFA World Cup 2014”, Pg 11,  https://www.coneq.org.uk/Brazil_docs/Infrastructure_Opportunities_WorldCup.pdf

2.  “Brasilia “caça” público para novo estádio”, 18 April 2013 https://www.valor.com.br/brasil/3091370/brasilia-caca-publico-para-novo-estadio

3.  “Brazil’s World Cup Challenges”, https://www.stadia-magazine.com/articles.php?ArticleID=64

4.  “Após morte de operário MPT pede interdição de obra da Copa no AM, 14 December 2013  https://g1.globo.com/am/amazonas/noticia/2013/12/apos-morte-de-operario-mpt-pede-interdicao-de-obra-da-copa-no-am.html

5. “Two die in Brazil World Cup stadium accident”, 27 November 2013 https://www.bbc.co.uk/news/world-latin-america-25127897

6.  “Time running out for Brazil’s World Cup stadia”, 28 November 2013, https://www.leisuremanagement.co.uk/detail.cfm?pagetype=detail&subject=news&codeID=307607

7.  “Funcionários da Andrade Gutierrez no Beira-Rio entram em greve”, 15 January 2013, https://www.valor.com.br/empresas/2970134/funcionarios-da-andrade-gutierrez-no-beira-rio-entram-em-greve

8.  “TCU aponta irregularidades em obras de duas arenas construidas para Copa”, 30 September 2013, https://www.valor.com.br/brasil/3287682/tcu-aponta-irregularidades-em-obras-de-duas-arenas-construidas-para-copa

9.  “TCE do Paraná suspende empréstimos do BNDES à Arena da Baixada”, 9 July 2013, https://www.valor.com.br/brasil/3192402/tce-do-parana-suspende-emprestimos-do-bndes-arena-da-baixada

10.  “Copa 2014: Desafios e Responsibilidades”, Pg 99, 2010 (published by the Brazilian House of Representatives), https://bd.camara.leg.br/bd/bitstream/handle/bdcamara/3624/copa_2014.pdf

11.  Stadium Agreement regarding the use of stadium facilities for the final competition of the 214 FIFA World Cup, https://www.slideshare.net/vitoriopifio/stadium-agreement?utm_source=slideshow02&utm_medium=ssemail&utm_campaign=share_slideshow

12.  “Investimento em telecomunicação só para Copa será de responsibilidade da FIFA”,  29 January 2013, www.valor.com.br/brasil/2986872/investimento-em-telecomunicacao-so-para-copa-sera-de-responsabilidade-da-fifa

13.  Proposal for injunction from Ministerio Público Federal, 2 September 2013, https://www.prdf.mpf.mp.br/imprensa/arquivos_noticias/acp-fifa-estruturastemporarias.pdf

14. “Brazil prosecutors sue over FIFA World Cup stadium costs”, 24 October 2014, https://www.bloomberg.com/news/2013-10-24/brazil-prosecutors-sue-over-fifa-world-cup-stadium-costs.html

15.  “Brazil World Cup puzzle is what to do with the stadiums at the end”, 14 June 2013, https://www.businessweek.com/news/2013-06-13/brazil-world-cup-puzzle-is-what-to-do-with-stadiums-after-events

16. “Custo das 12 arenas erguidas para Copa ficará acima do previsto aponta balanço”, 26 November 2013, https://www.valor.com.br/brasil/3351418/custo-das-12-arenas-erguidas-para-copa-ficara-acima-do-previsto-aponta-balanco#ixzz2nJ1HQxIX

17.  “Atrasos impedem o Brasil de tirar proveito de sediar Copa”, 28 March 2012, https://www.valor.com.br/opiniao/2590792/atrasos-impedem-o-brasil-de-tirar-proveito-de-sediar-copa

18.  Maifestantes protestam contra privatização e demolição do Complexo do Maracanã no Rio de Janeiro, 18 March 2013, https://agenciapulsar.org/brasil2013/mais/politica/brasil-mais/manifestantes-protestam-contra-privatizacao-e-demolicao-do-complexo-do-maracana-no-rio-de-janeiro/

19.  “With FIFA gone, Brazil stadium standards slide”, 23 July 2013, https://uk.reuters.com/article/2013/07/23/uk-soccer-brazil-stadiums-idUKBRE96M0MQ20130723

20. “Justiça do Rio de Janeiro suspende concessão do Estadio do Maracanã”, 10 May 2013 https://g1-globocom.jusbrasil.com.br/noticias/100507497/justica-do-rio-de-janeiro-suspende-concessao-do-estadio-do-maracana

Related Articles

About the Author

Poonam Majithia

Poonam Majithia

Poonam is a lawyer in the intellectual property team at CMS Cameron McKenna. Her areas of interest include the exploitation of media rights, brand protection, advertising law and ambush marketing.

  • This email address is being protected from spambots. You need JavaScript enabled to view it.

Leave a comment

Please login to leave a comment.

Official partners 

BASL
Soccerex Core Logo
SLA LOGO 1kpx
YRDA Logo2
SAC logo LawAccord

Copyright © LawInSport Limited 2010 - 2018. These pages contain general information only. Nothing in these pages constitutes legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter. The information provided here was accurate as of the day it was posted; however, the law may have changed since that date. This information is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. LawInSport is not responsible for any actions taken or not taken on the basis of this information. Please refer to the full terms and conditions on our website.