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Brazil's World Cup debacle hurts but not an election game changer

By Anthony Boadle

BRASILIA (Reuters) - Brazil's World Cup trouncing by Germany threw a bucket of cold water on a nation that was starting to feel good about hosting the tournament but the humiliating defeat is unlikely to be a game changer in October's presidential election.

Before the crushing 7-1 defeat on Tuesday, President Dilma Rousseff's approval ratings had crept higher as Brazilians got caught up in the excitement of seeing their team advance to the semi-finals in a World Cup that has been widely praised for its riveting action on the field and generally good logistics.

That excitement turned to despair on Tuesday and robs Rousseff of a feel-good factor heading into what looks likely to be a hotly contested election, where she is seeking a second term.

It also forces the country to turn its attention again to the reality of high inflation, an economy now in its fourth year of lackluster growth and widespread discontent about poor public services and heavy World Cup spending that fueled street protests over the past year.

Some market analysts believe Brazil's defeat was so devastating on the national psyche that it can only work against Rousseff on the campaign trail.

"We believe that our stated view – that the opposition is likely to win - has been reinforced by what can legitimately be regarded, from a Brazilian point of view, as a tragic sporting defeat," Nomura economist Tony Volpon said in a note to clients.

Yet most political analysts say the impact of sporting victories or defeats is short-lived in election campaigns, even a historic shellacking like Tuesday's loss to Germany.

They say there are more important factors at play in this Brazil election, above all rising prices in a slowing economy.

"Any impact the defeat will have on the elections three months down the road will be marginal," said João Augusto Castro Neves, with Eurasia political risk consultancy in Washington.

"If Rousseff loses the election in October it will most certainly be about the economy, and not because of the World Cup," he said in a telephone interview.

Polls show that Rousseff remains the clear favorite heading into the Oct. 5 vote, though her challengers have narrowed the gap in recent months. The election is likely to be decided in a second-round runoff against Aecio Neves of the pro-business Brazilian Social Democracy Party.

ECONOMY, NOT SOCCER, KEY TO ELECTION

Historical precedent shows little correlation between World Cup performance and election results in Brazil.

In 2002, Brazil won the tournament for a record fifth time but incumbent President Fernando Henrique Cardoso's party was ousted from office. Four years later, Brazil lost but President Luiz Inacio Lula da Silva was re-elected.

For Rousseff, the greatest risk of hosting the World Cup was never going to be the performance of Brazil's team on the pitch but rather her government's ability to organize a successful tournament. [ID:nL1N0O513G]

Despite delays in readying stadiums and other infrastructure glitches, it has gone much better than expected and the exciting soccer has made it one of the best World Cups ever.

The disastrous end to Brazil's hopes of winning the tournament on home soil for the first time could certainly hurt Rousseff's poll numbers in the near term and some fans booed her along with the team on Tuesday.

But the depressed national mood seems unlikely to trigger major street protests or become a significant issue in the election.

Fears that the World Cup would be hit by major political unrest never materialized with small protests fizzling out quickly as the event got underway.

Nor did Brazilians take to the streets in the wake of Tuesday's loss, making it unlikely that anti-government protests will return with a vengeance now that the tournament is ending.

"I would read any poll in the next few weeks with a grain of salt, because this will blow over," said Castro Neves, who predicts Rousseff still has a 70 percent chance of winning.

(Editing by Todd Benson and Kieran Murray)

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