Brazilian football clubs open doors to foreign investors

A new law allowing Brazilian football clubs to operate as corporations has opened the door for foreign investors to buy teams in the spiritual home of ‘beautiful football’ and follow in Europe’s footsteps.

The law, passed last year, could help struggling Brazilian clubs get their finances back on track.

After a century as not-for-profit organizations, Brazilian clubs have begun to transform their business models since Congress passed Football, Inc. Bill passed last August that encouraged the creation of SAFs, or “soccer companies.”

US investors have already negotiated deals to buy historic Rio de Janeiro clubs Botafogo and Vasco da Gama.

Brazilian soccer star Ronaldo, who has retired from his Ballon d’Or glory days in Europe, has bought Cruzeiro, the club where he made his professional debut, adding it to his investment portfolio alongside Spanish second division side Real Valladolid.

Before the law was passed, only two Brazilian giants were operating as a company: Cuiaba, owned by local tire maker Drebor, and Red Bull Bragantino, part of the international team at the Austrian drinks giant.

“Brazilian football has always been very closed to outside investment due to the domestically controlled business model,” said Cesar Grafietti, a partner at consultancy Convocados, who advises football investors.

“With these investments, the management of Brazilian clubs will tend to improve, which will bring even more money and therefore better performance,” he told AFP.

– ‘Win to be profitable’ –
Experts say Brazilian clubs are an enticing option for foreign investors.

Brazil is the world’s top exporter of footballers and its currency has been weakened by the coronavirus pandemic.

The business potential is “huge” in the football-mad country with 213 million inhabitants, said Grafietti.

Before becoming club companies, Botafogo, Vasco and Cruzeiro all faced financial crises, an all too common fate for Brazilian teams.

Now, fans and investors alike will be following the results.

Botafogo returned to the first division this year and is currently a respectable fourth in the league. Vasco and Cruzeiro both play in the second division and are fighting for promotion.

In 2020, the three clubs had accumulated around $442 million in combined debt, according to consultancy Sports Value.

Botafogo was bought by US businessman and virtual reality pioneer John Textor, who acquired a 90 percent stake in the club in March.

As part of the deal, Textor, who also own English club Crystal Palace and Belgian club Molenbeek, will invest $77m in the team over the next three years.

“Football is no different than any other business. You have to win to be profitable,” the 56-year-old magnate told CNN in March, before recruiting Portugal coach Luis Castro and signing a dozen new players.

Ronaldo bought a 90 percent stake in Cruzeiro for an undisclosed amount in April.

“We will not rest until we have fully implemented a management model that is efficient, ethical and gets results,” he said.

But the club has so far been relatively reluctant to sign new talents.

As for Vasco, US group 777 Partners, which owns Italian club Genoa and a stake in Spain’s Sevilla, is targeting a 70 percent stake in the club for $135 million.

The deal still needs the green light from Vasco’s advisors and partners.

– More offers on the horizon –
The pioneering club trio had to act quickly for “urgent financial reasons”, said sports marketing specialist Rafael Zanette.

But others are taking note and could be close behind, he said.

“In the future, some clubs interested in becoming SAFs will probably be more demanding in negotiations,” he said.

According to local media reports, second division club Bahia are currently in negotiations with City Football Group, owners of Manchester City and nine other clubs.

La Liga reigning champions Atletico Mineiro have announced that they do not rule out starting a business.

Other powerhouses like Flamengo, Corinthians and Palmeiras are holding out for now.

But that can change.

Zanette predicts that Brazil, whose clubs have won four of the last five Copa Libertadores, will dominate South American football even more under the new system.

“Latin America should look to the Brazilian market as a reference,” he said.

“This is the way to grow and even start to catch up with Europe.”

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