Brazilian football – GAME OF THE PEOPLE

BACK IN the 1970s, the financial industry identified Latin America as a land of opportunity, but only tentatively dipped their big toes into the water. The region was rich in raw materials and had rising populations that could propel growth in Argentina, Brazil and beyond. Most banks were cautious and entered into partnerships with other institutions to form consortiums. When the oil shock arrived and debt defaults became a reality due to hyperinflation, economic stagnation and crippling foreign debt, these consortium banks floundered and appetite for the region subsided.[1]

In 1988, with restructuring underway, Brazilian debt was used by Dutch electronics firm Philips, owners of PSV Eindhoven at the time, to buy Romario, then 24 years old and not quite the superstar he became. Philips paid US$ 4 million for Brazilian debt with a 25% discount. They then cashed the debt for Brazilian Cruzados and paid Vasco da Gama for young Romario.[2] This novel method highlighted that footballers had become a form of currency and were, effectively, the new raw materials.

Exports

Brazil is the biggest exporter of football talent in the world; in 2022, there were over 1,200 Brazilian footballing expatriates, with around 20% of them playing in Portugal, the most common migratory route for young talent. [3] The latest World Cup squad included only three of 26 players who were attached to Brazilian clubs. When Brazil won the World Cup in 1970, all 22 squad members were employed domestically. Of the 2022 players, 12 were playing for English clubs, five for Spanish sides and three plying their trade in Italy.

Brazil’s big 12 clubs [4], over the past decade, received more than € 2 billion in transfer fees, with Flamengo (€ 267m), São Paulo (€ 257m) and Palmeiras (€ 206m) the biggest earners. Selling to Europe is an important part of their business model and European clubs also cast their net wide in Brazil. Players like Vinicius Junior, Neymar, Richarlison and Gabriel Jesus were all signed from Brazilian clubs for sizeable fees.

The population of Brazil, now well over 210 million, is football mad, it has a number of iconic clubs but they lag behind Europe and are also in danger of trailing Major League Soccer. South America has always been looked upon as the world’s second football market, but its position could come under threat from better organised and financially smarter leagues. In order for Brazilian football to change, the clubs have to attract greater investment and more lucrative sponsorship and they have to increase the value of their playing resources.

The underlying feeling is that Brazil could/should be competing with Europe, that the raw materials should be benefitting domestic football far more and for longer. This could transform Brazil from Europe’s nursery to Europe’s peer, but before that can happen, the entire economic environment of the Brazilian game has to alter. Generally, in the digital age, South America should be gaining more of the global football market.

Laws

Brazil doesn’t just have major football clubs, it also has its share of major corporations – Vale, Electrobras and Petrobras, to name but three – and the country has the 12^th biggest economy in the world. [5] Vale, for example, is the biggest producer of iron ore in the world, which is Brazil’s top export. If the business world can leverage globalisation, then surely, football (one of Brazil’s most visible exports) can do likewise.

The rebooting of Brazilian football hinges on the success of a new law that enables clubs to create corporate structures – SAs (Sociedad Anônimas de Futebol). It’s not the first time such moves have been made, there were two attempts to make clubs more corporate in the form of the Zico Law (1993) and Pelé Law (1998). [6] Neither worked too well.

This latest law will open the door for greater investment from abroad, in fact it is already underway with two iconic but financially challenged Brazilian clubs, Botafogo and Vasca da Gama, benefitting from US investors. Meanwhile, another club, Cruzeiro, also with money problems, was bought by the original Ronaldo. These three clubs had combined debts of around US$ 450 million and, according to EY, the total debt among top flight teams was US$ 1.9 billion (R$ 10.3 billion) in 2020. As well as these takeovers, two clubs were already owned by companies, Red Bull Bragantino, now part of the Red Bull multi-club model, and Cuiba, who are backed by a tyre company.

Challenge

There is significant upside for Brazil’s leading clubs. Even considering the volatile nature of the country’s economy over the years, they are punching below their weight. In terms of status in football’s advertising markets, Brazil’s football ranks among the top five, but the commercial revenues of Brazilian clubs come in at 14^th. Only Ligue 1, the Bundesliga, Premier League and MLS are more important, but commercial revenues among Brazilian clubs amount to only US$ 170 million, dominated by Palmeiras (US$ 31m), Flamengo (US$ 29m) and Corinthians (US$ 23m). Clubs in Austria, Turkey, Mexico and Portugal certainly earn more from commercial activity.

Part of the problem is that Brazilian football brands are weak globally, even though around five million Brazilians live outside of Brazil. The definitive Brazilian football brand is the national team, recognised across the globe with an image – samba football – that is actually misaligned with reality. But Brazil still remains a major attraction at every tournament, 40 years since they last had a team that lived up to spirit of jogo bonita. Recently, there has been an attempt to promote Brazil through the rivalry between its two dominant forces, Flamengo and Palmeiras. According to Sports Value, there are just three clubs with an economic valuation exceeding US$ 400 million – the aforementioned and Corinthians. From a brand perspective, Sports Value considers Flamengo’s brand is worth US$ 154 million, some US$ 30 million more than Palmeiras. The consultancy revealed that mismanagement, budget imbalances, debt accumulation and a lack of transparency all conspire to impact Brazilian club brands in a negative way. [7]

A new way

The new SA law [8] will open doors for Brazil and right now, there is a move to break-up the existing structure and provoke a “Premier League moment” that transforms domestic football and moves clubs like Flamengo, Palmeiras, Fluminense and Corinthians into the global spotlight. This is motivated by a desire to leverage TV rights and commercial opportunities as well as improving the perception of Brazilian football. The national football federation has a poor image due to past corruption and inefficiencies. More revenues would mean better wages for young players which would have the effect of keeping talent longer at home before players move to Europe, which in turn would drive the price up and reap more rewards for Brazil’s clubs.

There are currently two consortiums trying to drive change: Codajas Sports Kapital, whose Liga do Futebol Brasileiro (Libra) has support from 16 clubs; and Liga Forte Futebol, which has backing from 26. Codajas has progressed its involvement by talking to Mubadala Capital, an arm of the Abu Dhabi sovereign wealth fund to sell 20% of its stake in the project for US$ 890 million. Apparently, Mubadala were chosen over a number of US private equity firms.

Codajas has very clear ambitions for the new Brazilian league – Lawrence Magrath told the media that in 10 years, he envisages Brazil being comparable to France’s Ligue 1 by revenues and in 20 years, Brazil to be the second biggest league in the world after the Premier League. At the moment, there’s a lack of consensus over TV rights, among other things, but talks with Globo, the main broadcaster, are expected to take place soon.

Brazil has two of the world’s megacities: São Paulo and Rio de Janeiro, with populations of 12.4 million and 6.8 million respectively. Brazil was badly hit by the pandemic and in its aftermath, poverty across the nation was expected to hit nearly 30% in 2022. São Paulo has a rate of between 13% and 19%, depending on where you source your figures, but it is clear that the number of people below the poverty line is growing. This in itself will pose a challenge for Brazilian football. [9]

Nothing moves too quickly, so the discussions around a football revolution in Brazil will undoubtedly drag on. It’s just one aspect of the South American game that could dramatically change if the will and money is made available. CONMEBOL must surely be hoping that the Copa Libertadores will become the Champions League of the Western Hemisphere, especially after moving to a neutral venue, one-legged final.

Brazil has had to deal with a general election and political unrest, a disappointing 2022 World Cup and the sad death of football legend Pelé. The nation is still mourning the loss of their sporting icon, but they could do worse than name a new league after the man who still represents everything that is good about the beautiful game in Brazil.

[1] The Silent Revolution: The IMF 1979-1989. https://www.imf.org/external/pubs/ft/history/2001/ch08.pdf

[2] The New York Times, Soccer Star Traded for Debt, October 1988. https://www.nytimes.com/1988/10/22/business/soccer-star-traded-for-debt.html

[3] Source: CIES Football Observatory May 2022.

[4] Brazil’s G-12 Wikipedia https://en.wikipedia.org/wiki/G-12_(Brazilian_football)

[5] Visual Capitalist October 2021 https://www.visualcapitalist.com/the-top-10-biggest-companies-in-brazil/

[6] Football Corporations in Brazil: New perspectives for investing in Brazilian football teams, November 2022. Gustavo Coehlo and Matheus Lamarca. https://www.ibanet.org/football-corporations-brazil

[7] Sports Value. Brazilian Clubs’ Economic Valuation 2021, December 2022.

[8] Ankura: Brazilian football – big opportunity, big risk https://angle.ankura.com/post/102i0es/brazilian-football-big-opportunity-big-risk?utm_source=mondaq&utm_medium=syndication&utm_term=Finance-and-Banking&utm_content=articleoriginal&utm_campaign=article

[9] World Bank in Brazil, October 2022. https://www.worldbank.org/en/country/brazil/overview

NATION capitals are very often not the seat of power in football – London, for example, has enjoyed periods of domination, but over the course of the past 50 years, Manchester and Liverpool have been England’s dominant cities as far as the beautiful game is concerned.

Across Europe, a similar tale is told – Germany, Spain, Portugal, France, Italy and Austria, to name but a few, have seen their capitals challenged and usurped by other cities.

Brasília, the capital of Brazil since April 1960, is different to so many other principal cities, chiefly because it was a purpose-built metropolis for administering a somewhat fragmented country. There are no long-established football clubs in the way both Rio de Janeiro and Sao Paulo have the game firmly embedded in their psyche, culture and history.

Today, Brasília has no representatives in the top levels of Brazilian football. It has a notable stadium that hosted games during the 2014 World Cup, but the Estádio Nacional Mané Garrincha remains a somewhat ghostly place that has been used for a number of different events, but rarely major football.

Tattoo conventions and culinary events have been held at the stadium and it is also used as a bus depot by the local authority, but it sits in a barren landscape and has become shabby. The general consensus tells us there is not a strong appetite to bring top football back to Brasília even though like all Brazilian cities, there are thousands and thousands of passionate fans.

The original stadium dated back to 1974 but the rebuild was designed to make a grand statement for the 2014 World Cup and 2016 Olympics. With a total cost of US$ 900 million, three times the envisaged bill, It is the third most expensive stadium ever built. As white elephants go, it’s one of the biggest. State officials have hinted it was a mistake to build such a structure in a city like Brasília and have calculated that it will take 100 years to recoup just 12% of the overall cost.

Brasília, of course, is a city renowned for its ambitious and striking architecture. When the city was built in the late 1950s – it took just four years – Brazilian architect Oscar Niemeyer, along with structural engineer Joaquim Cardozo created a number of breathtaking buildings which kick-started the Brazilian modernism movement. Brasília, which was seen at an attempt at creating a utopian city, sat at the heart of the Distrito Federal, a new capital for the nation in an area that was largely undeveloped. In 1960, the population was around 136,000 but today, Brasília has over 2.5 million people. It is regarded as a relatively affluent place, notably around the Plano Pilato, the centre of the city, but elsewhere there are slums and poverty.

In 1960, Brazil was considered one of the homes of the modern game, their national team won the 1958 World Cup and retained it in 1962, and their football was admired the world over.

It takes time to establish a football team, but in a country with legendary names like Flamengo, Corinthians, Santos, Botafogo and Fluminense, all from Rio de Janeiro or São Paulo, it’s not just about creating something attractive, it’s also a lot to do with changing mindsets. The top clubs from Rio and São Paulo have bigger fanbases in Brasília than any local team has ever had. The people moving to the new capital, largely civil servants and construction workers, brought their club allegiances with them.

These cities have dominated a Brazilian football culture that incorporates beaches, favelas and street football. Brasília’s problem is that many have seen it as being “unBrazilian” in that it has lacked the dynamic of the rich living alongside the poor. While this includes extreme suffering and high crime rates, it also cultivates a form of creative tension and aspiration among young people hell-bent on escaping the deprivation through football. But it could be changing as Brasília confronts classic Brazilian problems of inequality, congestion and urban sprawl.

Many footballers have come from poor and deprived neighbourhoods but the Federal District has produced some excellent players, such as Kaká, who was born in Gama, close to Brasília.

Creating new, local clubs with a credible following has always been difficult, some have been formed by entrepreneurs that have fallen by the wayside. The oldest professional club in the city is Brasília Futebol Clube, founded in June 1975. Playing in a kit that resembles Arsenal’s famous red and white, their home ground is the Estádio Nacional Mané Garrincha, but it is simply too expensive for small clubs to host games there. Although they have won the state league (one of the weakest) eight times, they are not even in the Campeonato Brasilense’s top division.

Brasília played in Série A in 2000 when an expanded league (116 clubs) paid tribute to former FIFA President João Havelange. In 2014, they won the inaugural Copa Verde, a regional competition designed to promote football outside of the main hubs, gaining entry to the Copa Sudamericana.

Legião are another club that are supposed to play their games at the Estádio Nacional. They were founded in 2006. They have played in Série C, albeit very briefly. Real Brasília were formed in 1994 and play out at Vila Planalto. They are simply known as Real Football Club today. Teams like Gama and Brasilense have tried to make play at representing Brasília, but the distance from the city to the club is 30km and 20km respectively.

If there can be any comparison with the struggle to make Brasília a footballing stronghold, it is in the new towns of Britain, where migration of people has been accompanied by their clubs, in other words, in locations like Milton Keynes, Stevenage, Basildon and Harlow, establishing a local club has had to overcome numerous hurdles.

It’s unlikely this will change, the best hope for the unloved national stadium is a commercial development that will circle the structure. It might pay, although it’s not what was envisaged. But if a World Cup cannot inspire a city, what hope is there? The old saying is, “build it and they will come”. That hasn’t really happened, has it?

@GameofthePeople

Photo: PA