Corinthiansâ€™ bid for Carlos Tevez was truly sensational. A few years ago it was unthinkable that any Brazilian club could pay such a large transfer fee (between Â£40 and Â£50 million depending on who you believe) for any player. Thatâ€™s not to mention his wages which are reported to be above Â£200,000 per week at Manchester City. The question is where did all this money come from?
Brazilian clubs in general are getting richer. The Brazilian economy is booming and the local currency, the real, is one of the strongest in the world having appreciated by more than 50% against the USD dollar since December 2008. This means that Brazilian clubs are able to offer more competitive salaries compared to clubs in other countries. The largest clubs in Brazil have also negotiated a multi-million pound TV deal which comes into effect next year.
Another source of income is club sponsors. Unlike Europe, clubs in Brazil have multiple kit sponsors. These sponsors put their name in all weird and wonderful places including: chest, arm, armpit, shoulder, back (top and bottom), stomach, backside, groin, socks. Even coaches are paid to wear sponsored merchandise. For example in the Copa Libertadores final, Santos coach Muricy Ramalho wore a cap with a couple of sponsors on it as well as a jacket sponsored by a building materials shop.
Many sponsors directly finance certain signings and playersâ€™ salaries. This is almost certainly how Santos are able to afford Neymarâ€™s basic wages of R$ 500,000 per month (about USD 317,000 or GBP 200,000) – he earns more than double that if you include his private sponsorship deals. According to local reports, around 80% of Ronaldinhoâ€™s R$ 1 million per month salary at Flamengo is paid for by sports marketing company Traffic. For more info about sponsorship in Brazilian football, see this FT report. Another point is that the top income tax bracket in Brazil is around 30% compared to about 50% in the UK and other European countries.
There are also many investment companies in Brazil that own playersâ€™ transfer rights and these companies often pay player salaries. They then loan the players to clubs and in return for the investment company paying their salaries the clubs put these players in the shop window so to speak. It is very common for playersâ€™ transfer rights to be owned by several parties. Gansoâ€™s rights are 45% owned by Sports investment vehicle DIS, 45% by Santos and 10% by the player himself.
Getting back to Corinthians and Carlos Tevez. I am told by an anonymous Corinthians fan that Kia Joorabchian (Carlos Tevez’s agent) would personally finance a large chunk of the player’s transfer fee. I am told this would be his way to repay some of the debts he left at the club. How true that is, I do not know. What I do know is that Kia, backed by the opaque investment vehicle MSI, was the Corinthians club chairman between 2004 and 2007. During this period of time the club won the Serie A title and Kia represented several key players including Tevez, Javier Mascherano, Carlos Alberto and Nilmar. He left the club in a financial mess in 2007 (apparently with debt of R$ 90 million) and they were then relegated later that year. He was also investigated by Brazilian authorities for possible financial irregularities including money laundering.
Another possible source of financing are the R$420 million in tax breaks that Corinthians are expected to receive for their new ItaquerÃ£o stadium. The club have negotiated the tax breaks because they say that without them the stadium would not be financially viable. Of course, they have a very strong bargaining tool because the ItaquerÃ£o stadium is SÃ£o Paulo’s last hope of hosting matches at the 2014 World Cup. It is unthinkable that SÃ£o Paulo â€“ Brazilâ€™s financial and business capital and one of the biggest cities in the world â€“ would not hold any world cup games. Of course the 70,000 capacity Morumbi stadium (owned by SÃ£o Paulo football club) would be the obvious choice. But for some very strange reason, it is not being considered as a venue. This decision seems to be down to politics rather than common sense or economics.
Corinthians eventually pulled the plug on the Tevez deal after failing to agree on the payment schedule with Manchester City. The transfer window for Brazilian clubs to buy foreign players is now closed but Corinthians don’t appear to have given up hope of a deal being reached in the future. Following the breakdown in negotiations, a Corinthians spokesman said: “We look forward to him being with us in the near future”.
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