A new law allowing Brazilian football clubs to operate as companies has opened the door for foreign investors to buy clubs on a model similar to the European continent.
The law was passed last year and is expected to help Brazilian clubs improve their financial situation. After a century of operating as non-profit organizations, Brazilian clubs have begun to change their business models since Congress passed the Football.Inc bill last August to encourage the formation of a football joint stock company.
Earlier, American investors were negotiating the purchase of the historic clubs Botafogo and Vasco de Gama, located in the state of Rio de Janeiro. Brazilian legend Ronaldo bought Cruzeiro, where he started his professional career, to increase his investment in Valladolid, Spain’s second division rivals.
Prior to the law, only two Brazilian first division clubs operated as companies: Cuiaba, owned by local tire manufacturer Drebor, and Red Bull Bragantino, a subsidiary of Austrian Beverage International, which includes several sports clubs. “Brazilian football has always been very closed to outside investment due to the locally controlled business model,” said César Grafite, advisor to football investors as a partner at Confucado. “Through this investment, the trend will be towards better management of Brazilian clubs, which will bring in more money and therefore better performance,” he told AFP.
“Victory to win”
Experts say Brazilian clubs are an attractive option for foreign investors. The country is a major exporter of football players to the world, and its currency has weakened due to the coronavirus pandemic.
Graffiti says the business opportunities are “enormous” in the soccer nation of 213 million.
Before becoming corporate clubs, Botafogo, Vasco and Cruzeiro were stuck in financial crises, a familiar fate for Brazilian teams. In the meantime, both fans and investors will follow the results.
This year, Botafogo returned to the First Division and are now fourth in the league. As long as Vasco and Cruzeiro are in the second division, they are fighting for promotion. In 2020, the three clubs accumulated debts totaling about $442 million, according to the consultancy Sports Value.
American entrepreneur and virtual reality pioneer John Textor bought the Botafogo Club, taking a 90% stake in March.
Under the agreement, Textor, who also co-owns Crystal Palace in England and Molenbeek in Belgium, will invest $77 million in the team over the next three years.
“Football is no different than any other business. You have to win to make money,” Textor, 56, told CNN in March before appointing Portuguese coach Luis Castro and signing dozens of players.
In April, Ronaldo bought a 90% stake in Cruzeiro for an undisclosed amount. “We will not rest until we have implemented a widely effective, ethical and results-oriented management model,” he said at the time. But the club has not yet concluded major deals. As for Vasco, the American group 777 Partners, which owns Italian Genoa and has a stake in Seville, Spain, is seeking to acquire 70% of it for $135 million. The deal is still awaiting approval from Vasco’s advisors and partners.
More deals
Sports marketing specialist Rafael Zanetti said the three clubs had to act quickly for “pressing financial reasons”, adding that other clubs may follow the same path. In this regard, he explained: “It is likely that in the future some clubs interested in becoming football joint-stock companies will be more demanding in negotiations.”
Bahia’s second-tier side are currently in talks with City Football Group, which owns Manchester City and nine other clubs, according to local media reports. La Liga champions Atlético Mineiro said they would not rule out joining the caravan, while other big clubs such as Flamengo, Corinthians and Palmeiras are still conservative for the moment.
However, this may change. Zanetti expects Brazil, whose clubs have won four of their last five Copa Libertadores titles, to continue to dominate South American football under the new system. “Latin America should focus on the Brazilian market. This is a way to grow and even start catching up with Europe,” he explained.
