The economic goal that never came: World Cup falls short of boosting Mexico

The World Cup filled stadiums in Mexico and thrilled millions of fans, but it could not lift a stagnant economy weighed down by weak investment and uncertainty about the upcoming review of the North American trade agreement (USMCA).

Mexico was the home team in 13 of 104 matches in the tournament, which ended on Sunday after more than a month of matches in Canada, the USA and Mexico. However, it fell short of ambitious official tourism targets aimed at boosting gross domestic product (GDP), which contracted in the first quarter.

“The World Cup will not structurally change the course of the Mexican economy,” said Humberto Calzada, chief economist at Rankia.

Calzada said the tournament offers only a short-term stimulus for an economy that the government expects to grow between 1.8% and 2.8% this year, compared to analysts’ forecasts of 1.1%.

The economic impact was quite local. Banorte lowered its estimate for the World Cup’s GDP contribution to 0.4%-0.5% from a previous estimate of 0.62%.

Banamex estimated the total economic impact at $2 billion; that’s about 0.1% of GDP and less than half of the $5.6 billion in remittances Mexico received in May alone.
Deloitte predicted the competition would create 100,000 temporary jobs; this was 10% less than the previous estimate. Meanwhile, BBVA reported that its household consumption indicator fell 0.2% month-on-month in June, despite a 16.5% increase in entertainment, with spending on hotels falling 10.5% and spending on restaurants falling 4.9%. Benefits were unequal between the host cities of Mexico City, Guadalajara, and Monterrey. The Mexican Restaurant Association reported that half of the establishments performed worse than in a normal week due to low hotel occupancy and local protests in the capital.

Air travel data was also mixed. Passenger traffic rose slightly in June in Guadalajara and Monterrey but fell at Mexico City’s main airport.

Analysts say the main driver of Mexico’s economy lies outside the stadiums: the certainty of trade under the USMCA.

The IMF recently cut its growth forecast for Mexico from 1.6% to 1.2% as companies halted investment ahead of a review of the trade deal and the economy contracted 0.6% in the first quarter.