May 6 (Bloomberg) -- The Brazilian government is planning to propose banning soccer teams from selling player-transfer rights to investors, a key source of revenue for many of the country’s cash-strapped clubs.
The plan is part of a wider bill that will be sent to Congress to improve the financial state of Brazilian soccer, the sports ministry said in an e-mailed statement. Clubs have unpaid tax debts of about 4 billion reais ($2 billion), according to Vicente Candido, a member of the ruling Workers’ Party on the lower house sports Committee.
A group of 21 Brazilian teams have joined to fight any ban on so-called third-party ownership plans which allow investors to loan clubs money in return for a stake in the future transfer rights of players. Soccer’s global governing body, FIFA, said it is discussing rules to stop the growth of the practice around the world. The European soccer federation, UEFA, has said it will wait to see what FIFA decides, and if that body fails to introduce a ban, the European group will do so. Europe is soccer’s biggest market and accounts for the majority of trades in the sport’s annual $2.5 billion transfer market.
“The ban -- as proposed by UEFA -- could impact the finances of the Brazilian and South American clubs negatively, as well as the flow of the international transfers of players between South America and Europe,” a public letter sent by the 21 Brazilian teams to FIFA on April 24 states.
“The Brazilian and South American clubs cannot remain silent in relation to this adverse scenario, otherwise they will once again be affected by a unilateral and sudden change of rules,” according to the letter.
About 90 percent of players in the country’s top league “are somehow linked to investors,” according Jochen Loesch, president of international business at Sao Paulo-based Traffic Sports.
Traffic has invested more than $75 million in the rights of about 60 players since it was founded in 2007.
Soccer is split over whether action should be taken against player investment, which has mushroomed since emerging in South America in the 1990s. Although banned in France and England, the practice is now common in Europe as clubs look for alternative sources of income. Investment funds say they are stepping in place of banks, and their arrangements should be seen as loans.
“The club in Brazil doesn’t have 100 percent of any player,” according to Amir Somoggi, a management consultant to many of Brazil’s top teams. “It’s impossible to put a good team to play without investors. They always use money they don’t have.”
The new board at Brazil’s most-popular team, Flamengo, revealed this year that the team had debt of 750 million reais, most owed in federal taxes linked to player salaries.
The team’s president, Eduardo Carvalho Bandeira de Mello, said he opposed the proposed legislation.
“I don’t think it’s a case of changing the law,” de Mello said in an interview. “It’s a case of managing your club better and to use this kind of partner in a way that’s good for both parties. But many times the club is in such a weak position that they don’t make good deals.”
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