THERE will be one Brazilian club in the final of the Libertadores Cup this year with four teams in the last eight all meeting each other and the winners of those ties meeting in the semi-final. After a relatively lean spell during which Brazil won just one in five (2017), the South American champions may get their hands on the impressive Libertadores trophy once more.
The other half of the draw sees a potential repeat of the 2018 final, River Plate v Boca Juniors, in the semi-final, which will undoubtedly send CONMEBOL into blind panic.
It’s not all good news for Brazil’s clubs, though. From a financial perspective, they have issues to deal with. The consultancy, LEK estimated that 70% of Brazil’s top clubs do not generate enough operating income to even service the interest on their debts.
In order for Brazilian clubs to change their status, they have to look beyond their own shores and adapt their business models. Brazil, as a nation, is economically volatile. It is the world’s ninth largest economy and during the financial crisis of 2008-09, it was one of the countries that the rest of the world looked to – it was one of the so-called BRICs (Brazil, Russia, India, China). GDP growth was 7.5% in 2010, for example, but by 2015, the country had tipped into what became a brutal recession. Most recently, it was announced that the Brazilian economy shrank for the first time since 2016. Brazil may have some very large corporates, such as Vale – the biggest producer of Iron Ore and Nickel in the world – and Petrobras, but 55 million people live in poverty, the equivalent of 26.5% of the population.
Distribution of wealth is alarming in Brazil. The richest six people have the same wealth as the poorest 50% of the country, some 100 million. Furthermore, the richest 5% have the same wealth as 95% of the population. David Goldblatt, academic and football writer, described the country as an “unequal society that is off the scale…many people are not just poor, they are very poor.”
Historically, working class neighbourhoods such as the Brazilian favelas have created excellent footballers – Tottenham’s Champions League hero, Lucas Moura recently explained that he chose football to avoid a life of poverty and crime. Brazil, according to the World Peace Index, is ranked among the 60 worst countries in terms of internal/external conflict. Furthermore, the World Economic Forum, in 2018, named Brazil as the 13th most dangerous country and the second largest consumer of cocaine in the world.
Brazil also has the highest rate of violence and deaths at football matches. In the past year there have been almost 150 violent fights at games and no less than 19 deaths.
Clubs operating against a backdrop of poverty will always be limited in how they can evolve and grow commercially. For many people, South America is still remote and disconnected and for decades, Europe and the US have attempted to unlock the potential of the major countries. In the 1970s, the global financial community dipped its toes into financing projects in Latin America, forming consortiums to spread the lending risk and ensure individual banks were not over vulnerable. A curious transaction emerged from this period when Romario became part of a debt-swap deal involving PSV Eindhoven’s owner, Philips, and impaired Brazilian debt. Philips used the heavily discounted debt to pay for the transfer of legendary striker Romario from Vasco da Gama to PSV.
The dilemma Brazilian clubs have today is that they lose all their star players to Europe at a very young age, which can have the effect of diluting the appeal of the clubs themselves to fans around the world. The defection age is getting younger all the time, witness Real Madrid’s acquisition of teenage striker Vinícius Júnior for € 46 million from Flamengo. Footballers, like most commodities, are part of an export-led economy (total exports US$ 218 billion in 2017), but while this has enabled the developers of talent to earn much-needed income, it has also undermined the quality and stability of domestic football in Brazil.
According to CIES Football Observatory, there are more than 1,300 Brazilians playing around the world as expatriates. The most commonly-used route is Brazil to Portugal, which has involved 261 of currently employed players. Porto, Benfica and Sporting, Portugal’s leading clubs, have 15 Brazilians in their squad at present. Some of this traffic has been restricted due to the outlawing of third party ownership transactions, which were banned by FIFA in April 2015.
It is widely believed that Brazilian football clubs need to transform themselves into businesses that can lure capital to the domestic game and new investors. The corporate sectors have succeeded in attracting the rest of the world to Brazil, it is arguably time to make Brazil’s top clubs into global brands that can become more competitive with Europe’s commercially-run footballing giants.