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World Cup boost for Brazil? Don’t bet on it

As Brazil hurries to complete preparations ahead of the start of the soccer World Cup on June 12, many Brazilians may be expecting the event to boost the nation's flagging economy - but economists are unconvinced.


Capital Economics this week warned that the event will do little to help Brazil's economy because it will not address the crucial structural problems at the heart of the country's longer-term growth issues.

"Any boost to Brazil's economy will be small and short-lived, and the structural problems that have limited growth over the past year or so will persist long after the last ball is kicked," the independent research firm said.

Read MoreBrazil flirts with junk status - what happened?

Neil Shearing, chief emerging markets economist at Capital Economics, added that only around two thirds of the planned government investment for the World Cup has actually taken place – and stressed that Brazil has a "woeful track record" of actually implementing public investment programs.

"Moreover, any boost to growth from investment related to the World Cup will already have happened – it's not going to raise growth during the period in which the tournament actually takes places," he said in a note.

One of the potential benefits to Brazil from the event is increased tourism revenue, with around 600,000 people expected to visit the country during the tournament. Jerome Valcke, secretary general of soccer governing body FIFA, recently warned fans to expect to pay high prices for limited transport and hotel options.

Read MoreBrazil needs investors to reclaim BRIC growth

As such, if each tourist stayed in the country for ten days and spent $500 a day, that would total $3 billion, Shearing said. "That sounds impressive, but it is small change in the context of a $2 trillion economy," he added. "Additional tourist spending might be equivalent to just 0.1-0.2 percent of GDP (gross domestic product)."

Capital Economics also highlighted the divergent economic benefits of the last two World Cups: in 2006, Germany did see a slight increase in GDP, but four years ago in South Africa, growth actually slowed.

In March, Standard & Poor's (S&P) downgraded Brazil's long-term debt rating to BBB minus, one notch above "junk" status. Brazil is rated BBB by Fitch and Baa2 by Moody's.

FABRICE COFFRINI | AFP | Getty Images

Regarding its decision, S&P said: "The downgrade reflects… the prospect that fiscal execution will remain weak amid subdued growth in the coming years." It added that the country has "a constrained ability to adjust policy ahead of the October presidential elections".

Still, according to polls, Brazilian President Dilma Rousseff is still on course to secure a second term in power in October, despite struggling to revive the economy since its dramatic slowdown in 2011.

While Brazil's GDP expanded by 7.5 percent in 2010, growth has slowed since, coming in at just 2.3 percent last year. The International Monetary Fund forecasts growth of just 1.8 percent for 2014.

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World Cup stocks

While the economic benefits of the World Cup may not be as much as hoped, there are some companies that could be worth investing in ahead of the tournament. Kingsley Jones, founder and CIO of boutique investment advisory firm Jevons Global, pointed to World Cup sponsors in particular.

"Adidas had some very good results in March but investors sold the stock off in the lead up to March and we think they're being too negative," he told CNBC. "Adidas has given some good forward guidance about what they expect will be good numbers from this World Cup so we think that's a terrific opportunity to get in at a good value."

He also pointed to AmBev – the Brazilian division of brewing company AB InBev -which he said had "sensational volume growth over the years." The company distributes and bottles products including Budweiser, another official World Cup sponsor.