Soccer Players Left Unpaid as Sponsors Flee: Corporate Brazil

The boost that the World Cup was supposed to give Brazilian soccer hasn’t materialized as a sluggish economy and budget shortfalls leave the majority of top division clubs unable to pay salaries.

Five of the league’s 20 clubs, including former FIFA world club champion Sao Paulo and Santos, where soccer star Pele spent the majority of his career, ended the season this month without major sponsors on their shirts. At least 17 clubs delayed players’ salaries this year, said a person with direct knowledge of the matter, who asked not to be identified because the issue is private.

Some sponsors canceled contracts after focusing spending on the World Cup, and others are reducing advertising budgets because of weak economic growth, said Luiz Gonzaga Belluzzo, former president of the Palmeiras soccer club. Toshiba Corp.’s joint venture in Brazil and payroll lender Banco BMG SA are among companies that withdrew their backing in the past year. Kia Motors Corp. said it won’t support clubs any more because returns fell short of expectations.

“The brand ends up being too connected to the team,” said Jose Luiz Gandini, chief executive officer of Kia’s unit in Brazil. “The clubs’ flaws can end up tarnishing the company’s image.”

To host the World Cup, Brazil built or renovated 12 stadiums at a cost of 8.4 billion reais ($3.24 billion). Officials including Sports Minister Aldo Rebelo insisted the tournament would usher in a new era of professionalism that would raise the level of competence of team management. Brazil would use the World Cup to help fix poor management by “professionalizing and democratizing the structures of football,” Rebelo said on a conference call with foreign media five months before the World Cup kicked off.

Business Model

Brazil’s Sports Ministry is backing a bill to let clubs refinance debts under certain conditions, including limiting spending, a press official said yesterday.

BMG declined to comment, a press official said. Sao Paulo, Santos and Semp Toshiba didn’t return e-mails and phone calls.

Soccer clubs get into trouble because managers are almost “amateurs” and they spend more than they make, said Walter Schalka, chief executive officer of pulp and paper maker Suzano Papel & Celulose SA and a former board member of the Santos club.

“If we don’t change this dynamic, this model will bankrupt us,” Schalka said by telephone from Sao Paulo. “This business model shows our complete deficiency compared with the European soccer model, which was on display during the World Cup.”

7-1 Rout

The World Cup was a success for organizers though not for the national team known in Portuguese as Selecao, or selection. Brazil was eliminated in the semifinals in a 7-1 rout against Germany that was the worst loss ever by a host nation. Brazil entered the tournament as a record five-time champion.

While Brazil failed to regain the World Cup trophy, its economy had already slipped into a recession. Gross domestic product contracted in the first half of the year and grew just

0.1 percent in the third quarter. Economists expect Brazil to expand 0.18 percent in 2014 and 0.73 percent next year, according to a weekly central bank survey published Dec. 8.

This season, just six companies are principal sponsors of 15 clubs in the top league, including Caixa Economica Federal, a state bank, that backs eight teams, or 40 percent of the league.

“I’ve never seen so many top teams without master sponsors,” Belluzzo said in a telephone interview from Sao Paulo. “It’s going to take a while to recover. Sponsorship contracts will come back, but for smaller amounts.”

Garrincha’s Career

Botafogo, which launched the career of Garrincha, an attacker who helped Brazil win two World Cups in 1958 and 1962, also delayed payments this year. In July, Botafogo players took to the field wearing red arm bands that said “We’re here because we’re professionals and because of the fans.”

Emerson Sheik, a Botafogo attacker, complained after he was dismissed by the team in October that some players didn’t have money to buy food. The Botafogo club, which was demoted to the second tier last week, said in August it hadn’t paid players salaries for more than three months after having its assets frozen.

Botafogo didn’t return phone calls.

Overall revenue of clubs, which includes the sale of player rights, will fall 8 percent this year and stay flat in 2015, said Fernando Ferreira, director of Pluri, a sports consulting company. Last year, spending by Brazil’s 29 biggest teams was 22 percent over budget, Pluri said in an August report.

Stadium Violence

Violence in stadiums is also discouraging sponsors, said former Palmeiras president Belluzzo. In October, a Palmeiras fan was killed on his way to watch the team play Santos. The death of a fan hit by a toilet thrown from the top of a stadium made international headlines in May.

“Having your brand exposed in an environment where there is violence among fans frankly inhibits many sponsors,” said Itau BBA in an October report.

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