The revelation that Barcelona paid over £20m more than they originally declared to tempt Neymar from the Brazilian seaside town of Santos to the more noble shores of Catalonia in May 2013 was noisy enough to bring down the then president Sandro Rosell and trigger an investigation into the finances of the striker’s father and main adviser, Neymar Sr.
It also shone a light on the complexity of the deal and the number of parties involved. In 2009, when Neymar Jr was aged 17 and was not even a regular in the first team, Santos already feared losing the boy’s services. To entice him to stay, the club put together a vastly improved contract negotiated by selling “chunks” of the player, accounting for 40% of his economic rights, to DIS, a fund belonging to a Brazilian supermarket mogul. By the time he was sold to Barcelona, Teisa, a group formed by some of the club’s directors, also owned a further 5% of the golden goose.
Neymar’s tale is emblematic of why Fifa’s decision to ban third-party ownership “within three or four years” will have a strong impact in Brazilian football. Without investors, Santos would have never been able to hold on to their biggest poster boy when big clubs, Chelsea included, came knocking – even though the process also included the club pretty much relinquishing any participation in the player’s image rights.
Worryingly, however, these types of deals are hardly restricted to top players. According to figures from the consultancy firm KPMG, 90% of the players in the Brazilian first division are involved in third-party ownership schemes and further reports by Brazilian media outlets show that even under-15 players have parts of their economic rights in the hand of investors.
Needless to say, Fifa’s announcement a fortnight ago sent shockwaves across the sporting sphere in Brazil. “The impact of his decision will be huge for Brazilian football because clubs have been heavily relying on partnerships with investors to make their signings,” says Eduardo Carlezzo, a Brazilian expert in international sporting legislation. “There is no control on how these deals are made and this excessive freedom now has a time to end”.
It is quite a paradoxical situation: over the last 10 years, even before the country was chosen to host the 2014 World Cup, Brazilian football experienced a financial windfall that saw total turnover by the 20 biggest clubs increase by 375%.
Sadly, debt rose at an even faster pace: the top 20 now collectively owe 475% more than 10 years ago. Protected by legislation that treats them like non-profit organisations, clubs have traditionally spent unwisely. Most of them either own decrepit arenas or nothing at all – six-times national champions and the club with the biggest fanbase, Flamengo, being the prime example. This chaotic scenario is an attractive opportunity for agents and investors looking for business.
DIS, for example, had a 300% return (£4.7m) for the £1.4m they paid for Neymar’s rights even before it came to light that Barcelona had in fact paid a much higher sum than they originally disclosed. At the time of the move, Barcelona said the transfer was worth £48.6m but, after questions were raised by a member of the club, they were forced to release documents showing the full cost to be more than £71m. DIS is now threatening court action to get a bigger slice of the transfer fee, much of which it has since been disclosed had been paid secretely to N&N, a company run by Neymar Sr, through a string of “consultancy deals” prompting tax investigations in both Brazil and Spain.
Apart from TV rights, sold individually, player transfers are the biggest source of income in Brazilian football and, according to Fifa, the country was the biggest net winner in the international transfer window between 2011 and 2014, pocketing £361m. It is quite likely that DIS and similar financial backers were left with the widest smiles.
“Investors are a necessary evil [for Brazilian football] because the financial pressures mean that few clubs can sign players without some external backing,” reckons Paulo Nobre, the president of Palmeiras, where 117 out of 195 players across first team and youth academies are not 100% owned by the club.
It looks immediately obvious that without outside investors Brazilian teams will be less able to attend to salary demands and therefore more vulnerable to poaching from overseas clubs. Fifa’s proposals could also affect the considerable number of repatriations that took place in the last few years.
What is certain is that Brazilian football could have done without another bombshell in 2014 – the year in which the were so unceremoniously torn apart by Germany in the World Cup semi-final in front of their own fans and where the Campeonato Brasileiro – the country’s premier competition – currently has an average attendance of 15,844. Hardly the massive post-tournament jump clubs had hoped for.
There are those who see the glass half-full. “It’s actually a very positive step for Brazilian football,” says Amir Somoggi, one of Brazil’s most respected football business experts. “Clubs will obviously take a financial hit in the short term but Fifa’s ban on third-party ownership should instead be seen as an opportunity. Clubs will have to focus more seriously on youth development and at least they will keep the money when their players are sold.
“The ruling will force Brazilian clubs to actually become more professional and modernise how they work their sponsorship and supporter service operations. Whoever has their feet on the ground will have financial and sporting success.”
However, some clubs sense a conspiracy orchestrated by Uefa to knock down transfer costs for European clubs when they go shopping. The Brazilian Football Confederation (whose elected president, Marco Polo Del Nero, has already said he would rather see tougher regulation in place instead of a complete ban on third-party ownership), led the South American lobbying against the decision in vain.
Brazilian clubs have a maximum of four years to shape up. Their bubble has been well and truly burst.