Itau Bank Attacks Brazil Soccer Clubs for ‘Reckless’ Spending

Brazil’s top soccer clubs “recklessly” wasted money from record TV rights fees on buying players instead of investing in youth development, according to a report by Latin America’s largest bank.

The revenue of Brazil’s 23 largest clubs almost doubled between 2010 and 2013, when total income reached 3.2 billion reais ($1.35 billion), according to Itau Unibanco Holding SA, the region’s biggest lender by market value.

Criticism of the way in which soccer, Brazil’s national sport, has been managed is a constant theme in local media and among fans. Some teams routinely fail to pay salaries on time and professional teams owe about 4 billion reais to the government in unpaid taxes. The national team’s 7-1 defeat to eventual champion Germany in the semifinals of this year’s World Cup played on home soil prompted further soul searching.

“Clubs need to professionalize,” the report said. “Management needs to prepare technically to make sound financial decisions and youth development needs to be given more attention.”

According to Itau, only 15 percent of the 787 million reais invested by teams in 2013 was spent on youth development. Producing home-grown talent would be a “substantially cheaper and better financial alternative solution,” the bank said.

Brazilian teams aren’t the only ones that spend the majority of their income on buying talent and paying bigger salaries to established talent. In England’s Premier League, soccer’s richest, spending money to develop youth prospects is much rarer than buying players.

Brazil’s government has been critical of the way teams are managed. It’s due to publish new regulations that will impose penalties on teams and specific officials for financial mismanagement. In exchange for accepting the new rules, teams will get as long as 20 years to repay longstanding tax debts.

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