Spaniards see dollar signs on the World Cup

It’s been more than a week since Spain won the World Cup, and the Spanish Institute of Tourism is still celebrating: “Ole! ole! ole!”

The office boasts on its U.S.-aimed website an image of the team members in a huddle as they celebrate their 1-0 victory over the Netherlands.

“This sort of success helps a great deal in improving the mood of the people,” said Paloma Notario-Bodelon, director of the institute’s New York office. “I am sure that a more optimistic and positive attitude helps us to believe that we can achieve our goals in whatever we need to do, gives a sense of being part of a team, and helps to bear the severe measures implemented.”

Whether it’s by raising national spirits and boosting consumer spending or by helping trade and tourism by raising the country’s international profile, Spain hopes to cash in on the triumph in South Africa by “la furia roja,” a burst of good news for a country whose economy is reeling under a mountain of debt.

While a World Cup victory doesn’t rank alongside fiscal stimulus, tax cuts or lower interest rates in boosting an economy in the long run, some analysts note a short-term economic bounce from a World Cup victory and past world soccer champions have experienced a “World Cup effect” of 0.7 percent growth for the year.

“We are convinced that soccer has an impact on the economy and therefore justifies some research effort. The effects at macro-economic level and on the financial markets are not so great that they can turn a recession into a boom, but they should not be underestimated. Past figures show, for instance, that … a World Cup winner enjoys an average economic bonus of 0.7% additional growth, while the losing finalist suffers an average loss of 0.3% compared to the previous year,” wrote Ruben van Leeuwen and Charles Kalshoven, economists with the Dutch bank ABN AMRO, in the 2006 report “Soccernomics.”

Mired in its worst recession in decades, with the economy contracting by 4 percent in 2009 and the government predicting a further pullback of 0.3 percent in 2010, Spain certainly could use such a lift.

At 20 percent, Spain’s unemployment rate ranks highest in the 16-nation eurozone, after a decade-long boom in which gross domestic product ballooned to $1.86 trillion in 2008. But now Spain faces a housing market crisis, credit rating downgrades, subway strikes and a hamstrung government. The socialist government in Madrid had to introduce tough austerity measures, including wage cuts for public-sector workers, to avert a debt-caused economic collapse.

But if recent numbers for the victorious countries in recent World Cups are any indication, Spain may make an economic comeback. Argentina, the 1986 World Cup winner, recorded a stunning 7.1 percent economic growth rate for that year. In 1990, Germany posted a 5.7 percent growth rate.

Brazil’s two World Cup victories coincided with upsurges of 5.9 percent (1994) and 2.7 percent growth (2002). Although the 2002 figure may look unimpressive, it reversed a recession and began a series of strong figures that, by 2008, had increased the nation’s GDP to $1.58 trillion. According to the Euromonitor International archive, since 2003, Brazil’s unemployment rate has fallen amid stronger economic and employment growth.

Italy, world champions in 2006, posted a 2 percent economic growth rate for the rest of the year, and its GDP increased more than $250 billion from 2006 to 2007. Its tourism receipts rose from $38.3 billion to $42.7 billion.

Spain hopes this trend continues.

“It generates confidence in our country, here and abroad, and that will also be good for GDP,” Spanish Finance and Economy Minister Elena Salgado said in a statement, adding that the World Cup “is good” for the country.

Jose Maria Romero, senior consultant at Madrid-based consultancy Equipo Economico, said, “It will most probably be beneficial for tourism thanks to the positive effect on the Spanish brand.”

Ms. Notario-Bodelon said the tourism office launched an advertising campaign the day after the final, featuring ads in daily newspapers in 25 countries, and received 35.1 million hits on YouTube and 49.4 million hits on Facebook.

Story Continues →

© Copyright 2013 The Washington Times, LLC. Click here for reprint permission.