Brazil’s 7-1 World Cup Loss Will Affect Its Elections And Stock Market

Image via Shutterstock

Brazil is out of the 2014 World Cup, and the spectacular nature of the exit, a 7-1 loss to Germany, has left the host nation reeling. The country’s citizens will wake up this morning with little hope for the rest of the month, and the bad taste left in their mouths may change the way the country functions in the long term.

A nation that’s fate is decided by a football game may seem a little sci-fi, but financial analysts have been counting the consequences of international events like the World Cup for decades. Brazil, according to one UBS analyst, at the very least will see both its elections and its economy hit by the ignominious loss to Germany.

Brazil’s Economy Falls In Face Of World Cup

Coming back from half time to a five-goal deficit may be the hardest thing that any of Brazil’s soccer players will ever have to do. Watching the display from the background will probably stick with the country’s star Neymar for the rest of his life, and the economic effects of the trouncing are likely to depress the economy for a little while.

According to UBS analyst Geoffrey Dennis, who heads up the bank’s emerging-market strategy, Brazilians may be hit hard by the national team’s performance. “It’s going to confirm to the people that ‘Look, our economy is struggling, we cannot get any growth, now we don’t even have a decent soccer team either,'” Dennis said.

Nomura analyst Tony Volpon agreed with that diagnosis, according to Bloomberg. “For a country that defines so much of its national character around its footballing prowess, losing at home cannot but have major repercussions beyond the acts of violence seen after the defeat,” he said.

Democracy At The Mercy Of Soccer

Democracy in Brazil is apparently going to reflect the performance of the country’s national team at this world cup. Brazilian president Dilma Rousseff, already dealing with low growth and high inflation, will have to face the electorate in October.

Brazilians are unlikely to forget the 7-1 loss to Germany for decades, and the country’s economy and political system may suffer hugely from the aftershocks of the bitter loss.

A world in which soccer decides the fate of financial markets may be one that analysts fear, but it might improve the quality of soccer punditry. There were very few soccer experts expecting a 7-1 score out of yesterday’s game. Perhaps the rigorous analysis by the likes of JPMorgan or Goldman Sachs could have added to the accuracy of Brazilian expectations and moderated the reaction to the country’s national embarrassment.