Opinion – Rodrigo Tavares: The possible impacts of the war in Ukraine on Brazilian football

Weeks before the invasion of Ukraine, a study by the European Parliament (2020/2268) detailed in 65 pages “the extreme sophistication of aggressive interference operations decided and financed by foreign actors [Rússia e China] against the EU.”

But it was the spate of sanctions and boycotts against Russia that made it possible to light up the dark streets in Europe where some of the Russian billionaires walk.

In 2021, Roman Abramovich, the owner of Chelsea, managed to obtain a Portuguese passport under the Nationality Law as a Sephardic Jew. The Porto rabbi who validated the process was arrested this weekend by the Portuguese authorities on suspicion of influence peddling, active corruption and forgery of documents. Also last week, accusations emerged, still to be validated, of the involvement of a Russian millionaire in a Portuguese media group.

One of the strategies used by oligarchs such as Abramovich, Dmitry Rybolovlev, Alisher Usmanov, Maxim Demin or Valeriy Oyf to pass through the palate of European society is the purchase or sponsorship of European football clubs, such as Chelsea, Everton, Arsenal, Monaco, Brugge or the Vitesse.

It is a device also applied by billionaires from several other countries. The American Glazer family controls Manchester United. Mansour bin Zayed Al Nahyan of the UAE owns Manchester City. Mohammed bin Salman from Saudi Arabia bought Newcastle. Tamim bin Hamad Al Thani leads PSG. Inter Milan, Espanyol and Granada have Chinese owners.

If we continue in the English league, almost all clubs are owned by foreign capital:

Everton (Iran), Southampton (Serbia), Wolverhampton (China), Leicester (Thailand), Watford and Leeds (Italy) are other examples.

American investors control clubs in Italy (Genoa, Fiorentina, AC Milan, Spezia, Rome, Venezia), in France (Bordeaux, Marseille) and in Spain (Mallorca). It’s a way for new owners to project soft power.

This is allowed because the vast majority of Europe’s top clubs have been companies – for many years. Among the football clubs that reached the quarterfinals in the Champions League this year, 15 are corporations (the exception is Real Madrid). They have presidents, directors and shareholders.

The purchase and control of some of the European clubs by foreign billionaires is not, of course, just motivated by economic principles. Private equity and equity funds don’t look at football companies as financially interesting. The share value of the main European football clubs has been on a downward trend in the last 5 years. In the last 12 months alone, Chelsea shares are down 55%, Manchester United 33%, Juventus 49%. There are no ETFs that invest transversally only in football clubs, given the low performance of an eventual instrument of this type.

Although he was late to the debate, Brazil is also on the verge of transforming its football. With the new law 14.193 of 2021, which establishes the football joint-stock company, several football clubs are preparing to become companies and, with that, receive capital from investors. This is despite the tax profile of these new corporate entities being unfavorable when compared to the old associative model.

The commercialization of football clubs is good news. It will oblige these entities to embrace government transparency practices, to carry out a more rigorous accounting management and to professionalize administrative management.

But the new Brazilian law has a loophole. It does not impose brakes. In an interview with the column, Fernando Prado, partner in the business area of ​​the Pinheiro Neto law firm, highlights that “any individual or legal entity, investment fund of any nationality may hold a stake, directly or indirectly, in a Brazilian football company”.

The arrival of national and foreign capital to irrigate Brazilian clubs is welcome, but these transactions must guarantee the sustainability of the clubs’ growth, preserve the relationship with the fans and ensure that collective associations are not used for manifestly personal purposes.

But the new law does not provide for any restriction, nor of corporate volume, contrary to other countries:

In Germany, fans need to own at least 51% of the shares, unless a sponsor has been investing in the club for more than twenty years. Even though they are companies, the fans continue to control the club.

In Portugal, by law, football companies, some of them listed on the stock exchange, must have at least 10% of their share capital held by the founding club (currently 40% in the case of Benfica, 84% in the case of Sporting). The originating clubs are also subscribers to a special type of shares (Category A), which are only subject to judicial seizure or encumbrance in favor of legal persons governed by public law.

In Brazil, foreign nationals are subject to restrictions on land acquisition and participation in media companies. Various other types of controls, prohibitions or limitations on foreigners are provided for by law in other sectors such as nuclear energy, healthcare, telegraphic and postal services, aerospace, banking and financial markets, air transport or mining.

But not in football.

With the image in ashes, accounts frozen in some countries and movement amputation in several others, foreign billionaires targeted by sanctions may look to Brazilian football as an image rehabilitation platform. Canadian teams are very cheap compared to European rivals, animosity towards foreign capital is low and the positive branding of Brazilian football at an international level will allow foreign investors to have global visibility.

At that moment we will test our convictions. Will we be able to endorse sanctions on Russia and at the same time not root for our teams with Russian capital? What if the capital comes from a country that violates human rights but is not under the radar of the world’s media?​

Here in Europe we have not discussed these inconveniences and doubts. It should be like this at least until the end of May, while the Champions League lasts.