Brazilian football – where money talks instead of reason

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Palmeiras are in dire straits, financially speaking. The Tirone administration repeated the modus operandi of previous administrations and left the current one with some 70% of revenues already allocated, effectively crippling the most basic of functionality. Making things worse: if it’s one thing Paulo Nobre has not delivered, it’s increased revenues. Yesterday, after 18 months as president, he finally sacked Marcelo Giannubilo, head of Palmeiras’ marketing division. Results have been pathetic, to
say the least: an expressive increase in the Avanti membership programme (however with numerous complains concerning logistics, policies, customer support, etc.) and the smash hit “TV Palmeiras”. That is all. No wait, there were also several expensive commemorative jerseys launched and advertisement printed on take-away pizza boxes.

Palmeiras CEO José Carlos Brunoro is taking the reins at Marketing, but rather symbolically: the hands-on is expected to be carried out be those already integrating the department, especially Luis Fronterotta and Paulo Henrique Zago. Good luck to the lads: in a few months they are expected (or are they?) to achieve what hasn’t been achieved in the previous 18 months.

So, Palmeiras are out of cash. In fact, so badly that president Nobre has lent his good name as guarantee, enabling Palmeiras to take up loans with more attractive interest rates. New loans that today amount to a staggering US$ 47 million. Some see this as the Club being hostage to the president. On the other hand, these new loans mature much later than other loans, providing Palmeiras with the possibility to refinance debts and relieve the pressure. Palmeiras are at least honouring commitments with staff and players, something many other clubs do not.

debtsIn fact, many Brazilian clubs have large, private debts. Most of them also sustain large public debts, i.e. tax debts. In this requisite, Palmeiras are actually not doing too badly, at least not comparatively: both Flamengo and Botafogo have tax debts more than five times those of Palmeiras (see table to your right, in millions of Brazilian reais: divide by 2.25 for US$). You might wonder how a club is allowed to function when owing the Government some US$ 170 million. Welcome to Brazil.

Independent football writer/journalist James Young recently put up an interesting piece on debts within Brazilian club football and the recent attempts by cartolas – the presidents of the clubs – to address the problem through the lobbying for passing of new laws and regulations. With Young’s approval, below you find substantial extracts from his article, available in full at The Botafogo Star.

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“Last Friday, caps in hands, the chairmen of 12 of Brazil’s biggest football clubs travelled to the national capital Brasilia to meet with president Dilma Rousseff. The reason for the trip was to discuss the proposed Law of Sporting Financial Responsibility, which aims to restructure teams’ massive public debts over a 25 year period, while not unreasonably requiring them to comply with their financial obligations, such as paying players’ wages on time. In the murky world of Brazilian football, such obligations are often seen as optional.

“If the law isn’t passed, some clubs won’t make it to the end of the year,” said Brazilian football minister Toninho Nascimento at the meeting, while Botafogo president Mauricio Assumpção claimed that the club’s financial crisis had made him consider withdrawing Fogão from the Brasileirão national championship.

(…) Botafogo are perhaps the most visible example of the financial mayhem that swirls around Brazilian clubs. At Sunday’s clássico against Flamengo at the Maracana in Rio de Janeiro, players took the field carrying a banner that said “We’re only here because we’re professionals, and for you, the fans” before listing the money that they were currently owed by the club – five months of image rights payments, three months’ wages and FGTS (an unemployment/retirement fund).

(…) The reason behind the financial crisis that affects Brazilian football is fairly simple. Clubs spend more than they earn. A lot more. While football makes an odd business model – the end goal is almost always to accumulate trophies, rather than profit – the Brazilian game takes this to extremes. Fans are feverishly impatient and clubs are run by presidents (usually local politicians of one stripe or another) elected on short mandates, meaning the aim is to garner as much glory in as little time as possible. Long term planning, financial or otherwise, is rarely a priority.

In short, Brazilian clubs spend like big European teams but are run more like amateur outfits, often with income levels to match. According to the Folha de São Paulo newspaper, a whopping 32% of the income of Brazilian football’s top 20 clubs comes from domestic TV broadcast rights. But the TV deal was negotiated on a club by club basis – in 2016 the country’s two biggest teams, Flamengo and Corinthians, will earn £45 million each, while outfits such as Botafogo, Grêmio and Cruzeiro will make just £16 million. With a few honourable exceptions, merchandising operations are antiquated (there could hardly be a more timely example of this than the recent inability to close a licensing deal with EA Sports, meaning the names of Brazilian clubs will not be included in FIFA 2015), and money from overseas TV deals is miniscule.

Ticket sales bring in just 10% – the average Serie A crowd was a paltry 14,000 last year. This is due to a number of factors, such as a nonsensical, crowded fixture calendar which tires players and wearies fans, high ticket prices, blanket TV coverage and inconvenient kick-off times, a fear of torcida organizada violence, rickety public transport systems, and a fickle fan culture where supporters will only turn up for big occasions, or if their team is doing well. Brazilian clubs offer sócio (members) packages rather than season tickets, as membership can always be cancelled midway through the season if the team is doing badly, whereas season tickets cannot – and few Brazilian fans are going to sign up to a scheme that means they have to pay out hard earned cash irrespective of whether their team is winning or losing.

(…) If there is any cause for optimism, it is that at least now the problem can no longer be ignored. Just as the 7-1 humbling of the national team at the hands of Germany in the World Cup semi-final called attention to Brazilian football’s on-field inadequacies, so the actions of players at Botafogo and other clubs – most notably in the form of the Bom Senso FC (“Common Sense FC”) player movement, which emerged last year demanding better working conditions for Brazil’s footballers – are bringing the financial chaos in the local game to light, and not before time.”

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Backstage, the battle is fierce. The Bom Senso FC movement mentioned by Young is also actively lobbying the Government, but actually in opposition against the Bill – as it now stands – proposed by the cartolas. BSFC argues that the proposal lacks both control mechanisms and, more importantly, diversified means for gradually putting pressure on clubs. BSFC predicts – and I would say rightly so – that the one and only punishment foreseen in the Bill, relegation, rarely or never would be put to use. After all, who would dare relegating Flamengo or Corinthians? BSFC says the law therefore is in need of additional items, and have presented these in a separate document.

Last but not least, major stakeholder Globo has started to move. Brazil’s dominating TV network is directly or indirectly responsible for much of what is wrong with football in this country – from the insanely late kick-off times on weekdays to the explicit divide et impera tactics used to negotiate abovementioned transmission rights. Globo has steadily been losing audience due to the deteriorating quality of the spectacle, both on and off the pitch. The Network is reacting by inviting a selection of cartolas to discuss the future of Brazilian football – from the training of athletes and catering of youth academies to the annual calendar, professional management and financial aspects. The first meeting is scheduled for 29 August.

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7 Comments

  1. Well written. I like your impartiality to write about it. I just want to make a correction: $1 = R$ 2,25. So the final value in dollar is about U$ 30 millions which is still a lot for debts only with the government. Thank you for bringing this theme by your words.

    1. Thank you, Rafael. Another reader made the same observation, I had it corrected yesterday. The 170 million number usd in the text actually refers to Flamengo’s debt, not Palmeiras. Again, thank you. Nothing like having readers who pay attention to detail!

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