Will Brazil Be Ready to Host the World Cup in 2014?
Brazil, South America's largest economy, is looking for foreign investment to help shore up its creaking infrastructure. With the country hosting the World Cup in 2014 and the Summer Olympics in 2016, there are lingering questions about whether its airports, roads, trains and power system will be ready for the influx of visitors next year.
To fund desperately needed infrastructure projects, Brazil now is looking for private investment. After presentations in Sao Paulo, the country is taking its infrastructure sales pitch to the United States with a roadshow in New York followed by one in London and potentially two in Asia.
Among those presenting at the roadshow are Brazil's Finance Minister Guido Mantega, Bernardo Figueiredo, president of Brazil's National Logistics & Planning Company, and Luciano Coutinho, the president of the state-owned Brazilian Development Bank (BNDES) which has allocated $2.2 billion specifically to the building of World Cup stadiums. Those in attendance listening to the pitch included hedge fund managers, money managers, representatives from Goldman Sachs and JPMorgan and Singapore's sovereign wealth fund.
The roadshow kicked off with Mauro Vieira, Ambassador of Brazil to the United States, who said the Olympics and World Cup "coupled with the growth of the country's middle class keep Brazil as one of the most attractive countries in the world for doing business."
The key to driving investment dollars to the country will be the return for investors. Will investing in an airport or highway in Brazil actually pay off? Finance Minister Mantega said it will, telling CNBC "the return on these projects is 10 percent per year or more."
According CG/LA Infrastructure's president and CEO, Norman Anderson, Brazil is looking to raise $100 billion dollars per year for the next five years. He told CNBC that he estimates nearly 50 percent or more of new infrastructure projects in the country are currently being funded privately.
Back in April 2011, Anand Hemnani, the chief investment officer of Sao Paulo-based CG/LA Infrastructure, told CNBC that the World Cup could potentially be a disaster.
"If you look at the state of our airports, the state of our highways and the state of our urban mass transit, you'll see that you simply cannot have more people using the system than we already have now, let alone the demand that comes in from these other events such as the World Cup and the Olympic Games," he said.
Today, Hemnani is more optimistic. He told CNBC "not only the national government but the subnational governments are collaborating with Brazilian National Development Bank and the key pension funds are fast-tracking their priority projects." He added, "The rhetoric has somewhat changed in that there is a real sense in long-term planning."
Brazil estimates that all World Cup stadiums will be complete by December. The first real test comes in June when the country hosts the FIFA Confederations Cup, which will take place in some of the stadiums being built for the World Cup.
When asked if the country will be ready for the Olympics and the World Cup, Brazil's Finance Minister Guido Mantega told CNBC, "We are ready, the infrastructure is being prepared, the stadiums are all being built, we are going to have an incredible collection of stadiums in Brazil."
He also expects the major airports and infrastructure will be ready for the World Cup, joking "Brazil will be prepared to win the World Cup."