Presidential decree imposes fiscal control and opens up for refinance of debts of Brazilian football clubs

After two years of negotiations between representatives of football clubs, Congress and the Government, President Dilma Rousseff today signed the provisional measure that addresses, among other things, the debt of Brazilian football clubs with tax authorities, estimated at a whopping  R$ 4 billion (US$ 1.25 billion). As the law takes effect, clubs will be allowed between 120 to 240 months to pay off their debts with tax authorities, in monthly parcels and at interest rates of 2-6 per cent.  

Earlier this January, Rousseff vetoed a similar version of the decree, as it contained nothing that obliged clubs to address the root of the problem: irresponsible management practices. The decree signed today contains these mitigating measures, obliging clubs to:  

– publish standardized financial statements audited by independent companies
– pay all fees and taxes on time, including social security, labour and contractual contributions, and image rights
– not spend more than 70% of gross revenue on professional football
– maintain a minimum and permanent investment in youth and women’s football
– not anticipate revenues from subsequent terms, except in very specific situations
– adopt a progressive schedule, aiming at zero deficit by 2021

Clubs that break the rules risk being  downgraded to a lower division. In addition, directors of clubs can be made legally responsible for their actions.
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In her speech, President Dilma recognised that the chaotic situation in many football clubs stems from a combination of anachronistic legislation, little professional management structures, lack of transparency and accountability mechanisms, resulting in a high level of debt.

Representing the clubs at today’s event, president of Flamengo Eduardo Bandeira de Mello stressed that the main virtue of the project was not the refinance of debts, but the necessary measures of accountability and governance that came with it, moralizing and revolutionizing the management of Brazilian football.

After being published in the official annals, the decree turns into a law valid for up to 120 days. During that period, a special committee composed of members of parliament from both chambers examine the text, approve it, rejects it or suggest changes. In the case of the latter, it will have to go back for voting n the Congress before again being brought up before the president for a final approval or rejection.

The law is an important step forward. There are still major question marks regarding who will be responsible for monitoring the clubs’ compliance and who will have punishing authority. Ideally, an external organ should be set up, having a mandate to regularly, for example on a monthly basis, make sure clubs are honouring their obligations. Another welcome feature would be progressive punishments, with clubs loosing points when behaving badly. The “sudden death” approach, with relegation or no relegation being the only option, tends to both limit the inclination for punishing wrongdoers and, rather contradictious to the previous statement, open up frightening prospects for foul play and traps.

Many things in Brazil look good on paper, and only on paper. Time will tell.

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