A century-old store, a South American crisis: Can international "share reform" save South American football?
At a time when many century-old stores were in crisis, the Brazilian government had to change the law to allow clubs to change from non-operating membership to joint-stock to attract capital. North American, Middle Eastern and European capital, which has already swept the top five leagues, has poured in. Argentine professional football is also trying to achieve such a "share reform" direction. The "share reform" of international capital, for the time being, has become a "quick-acting life-saving pill" for South American football.
The sinking of Santos, who has never been relegated, has shaken not only the Brazilian football circle, but also the entire South American football industry. Since the era of globalization, South American football, which has been left behind by European football, has reached an existential point where radical changes must be made. In fact, Brazil is trying to allow professional clubs to become joint-stock companies, and to get clubs out of debt crisis by amending the law to attract private capital, mainly foreign acquisitions. At the same time, the copyright and commercial operation of the Brazilian League will also be opened to venture capital as a whole.
One of the platforms of the inaugurating new Argentine president, Milley, is also to save Argentine football by fully privatizing Argentine professional clubs and introducing capital acquisitions. For South American football, which is mired in economic crisis, this is an opportunity to come back from the dead and reintegrate into the future of football globalization. It's just that whether international capital can bring South American football back to prosperity is only time to tell.
After the first decade of the 21st century, Brazil experienced a recession and then fell into an unprecedented crisis. The club is heavily indebted, and the giants have suffered relegation one after another. Since 2012, among the Brazilian "G13" giants, Palmeiras, da Gama, Botafogo, Discovery Harbor International, Cruzeiro, Gremio and this year's Santos have been relegated one after another. Among them, Vasco da Gama, one of the four giants in Rio, has been relegated three times, and Botafogo has been relegated twice, and the league has reached a bleak situation where the giants are difficult to protect themselves.
The Brazilian government had no choice but to amend the law to allow clubs to change from a non-operating membership system to a joint-stock system to attract capital. North American, Middle Eastern and European capital, which has already swept the top five leagues, has poured in: at the beginning of 2021, Dexto, the majority American shareholder of the English Premier League Crystal Palace club, acquired Botafogo (BRL 400 million), and at the end of 2021, Ronaldo led North American capital to buy Cruzeiro (BRL 400 million), the parent club of the Brazilian Second Division. At the beginning of 2022, 777 Partners, an American-owned company that owns Serie A Genoa, acquired da Gama (BRL 700 million). Manchester City's core city football group has also acquired the Bahia club and pledged to invest BRL 700 million to buy players and renovate infrastructure. In May, São Paulo-based Treecorp Partners acquired the Curitiba club for 1.3 billion Brazilian reals. Since Brazil opened its joint-stock system in 2021, more than 40 clubs have changed to joint-stock so far.
With the acquisition of foreign capital, these Brazilian giants have also integrated into the globalization of football with capital. Bahia, along with Uruguay's Montevideo City, is a satellite club of the Emirates of Abu Dhabi around the world, and Bolivia's Bolivar Club is also a partner club of City Football Group. Genoa, Hertha Berlin, Standard Liege and Red Star Paris are also sub-clubs of Da Gama, while Sevilla in La Liga and Melbourne City in the Australian Super League also have a small stake in the capital, and 777 Partners is also working to buy Everton in the Premier League.
Botafogo has entered the European and American football industry chain by owning the same American owners as Crystal Palace, Lyon and Belgian Molenbeek.
Cruzeiro, who had a debt of 900 million Brazilian reals, was confined to the Brazilian second division for three seasons, and immediately returned to the Brazilian league after being acquired, qualifying for next year's Copa Sudamericana. The American-owned Botafogo finished fifth this season and entered next year's Copa Libertadores qualifiers alongside Red Bull side Bragantino. Vasco da Gama and Bahia had a slightly worse result, but they also managed to survive relegation in the final 1 round, sending centennial giants Santos to the second division. In July this year, it was acquired by a consortium formed by four Brazilian billionaires, and Atletico Mineiro, which completed the privatization, also won the third place. Of the 9 Brazilian league clubs that have been restructured, only Curitiba and Mineiro America, which are already weak, have been relegated.
The future of Brazilian football depends not only on foreign capital transfusing the club, but also on the fact that capital tries to buy the Brazilian first and second leagues as a whole, packaging them like the Premier League and promoting them globally. Could this be the last chance for Brazilian football, which is mired in debt and struggling to make ends meet?
At present, there are two investment funds dedicated to covering the entire Brazilian professional league, and Mubadala Capital, headquartered in the United Arab Emirates, has established the Libra (Liga Brasileira de Futebol) club, including 11 Brazilian clubs including Flamengo, Corinthians, Palmeiras, Santos, Cruzeiro, Gremio and other giants, as well as 7 Brazilian second division clubs. Brazil is the Emirate's sovereign wealth fund arm with offices in New York, San Francisco, London and Rio de Janeiro and $20 billion in capital.
New York-based Serengeti Asset Management and venture capital fund Life Capital Partners' Brazilian arm jointly invested in the launch of Liga Futebol Forte (LFF), which is made up of 9 Brazilian Ligue 1 clubs, 12 Brazilian B clubs and 5 Brazilian B clubs led by Fluminense, Atletico Mineiro and Discovery Harbor International. Mubadala Capital offered $900 million to buy 20% of Bajia's commercial gains over the next 50 years. The two capitals behind the LFF bid up to $950 million on the same terms. The two major venture capital companies are still in negotiations, with the goal of monopolizing the rights revenue of the Brazilian League A and the Brazilian Second League. The existing TV rights contract expires at the end of next year and is only BRL 480 million per year. Both venture capital funds are hoping to sell the rights to the Brazilian league in its entirety, with a price tag of 2 billion Brazilian reais ($400 million) a year.
The overall marketing model of Libra and LFF is similar to Citibank's CVC agreement for investment in La Liga, which has already landed in La Liga and Ligue 1, and Serie A is negotiating a similar model. Libra plans to invest BRL 4 billion (USD 800 million) in its clubs over five years, while LFF plans to invest BRL 2.6 billion (USD 527 million) in its clubs over 18 months, with BRL 1.2 billion already in place. The distribution of funds is 45% according to the number of clubs, 30% according to the league position and 25% according to the number of fans of the club. The distribution scheme offered by Libra is 40% divided equally by the number of clubs, 30% by league standings, and 30% by the number of fans of the clubs. Eventually, they will find a suitable solution, as both capitals must have 100% control over the clubs in the first division and the second division in order to advance the strategic plan for the overall marketing of the league.
No matter how the final capital completes the plan of the overall operation of the Brazilian league, it is the hope of survival and development for South American and even Latin American football, which once stood shoulder to shoulder with Europe.