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

MEXICO CITY, July 17 : The World Cup left stadiums packed and millions of fans euphoric in Mexico, but failed to lift a sluggish economy weighed down by weak investment and uncertainty over the upcoming review of the North American trade agreement (USMCA).

The tournament, which ends Sunday after more than a month of matches across Canada, the United States, and Mexico, had Mexico host 13 of 104 games. 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 trajectory of the Mexican economy," said Humberto Calzada, chief economist at Rankia.

Calzada noted the tournament offers only a short-term stimulus for an economy the government expects to grow between 1.8 per cent and 2.8 per cent this year, compared to analysts' forecasts of 1.1 per cent.

The economic impact was highly localised. Banorte lowered its estimate of the World Cup's GDP contribution to 0.4 per cent-0.5 per cent, down from a previous forecast of up to 0.62 per cent.

Banamex calculated the total economic impact at $2 billion — about 0.1 per cent of GDP and less than half of the $5.6 billion Mexico received in remittances in May alone.

Deloitte projected the competition created 100,000 temporary jobs, 10 per cent fewer than its previous estimate. Meanwhile, BBVA reported its household consumption indicator fell 0.2 per cent month-on-month in June, with spending on hotels down 10.5 per cent and restaurants down 4.9 per cent, despite a 16.5 per cent spike in entertainment.

The benefits were uneven across the host cities of Mexico City, Guadalajara, and Monterrey. The Mexican Restaurant Association reported that half of its establishments performed worse than in a typical 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 the Mexican economy remains outside the stadiums: trade certainty under the USMCA.

With companies holding back investment ahead of the trade pact's review, and the economy contracting 0.6 per cent in the first quarter, the IMF recently trimmed Mexico's growth forecast to 1.2 per cent from 1.6 per cent.