New York Times
SÃO PAULO, Brazil — Some co-workers are sitting around their office here on a recent Monday afternoon, dissecting the weekend’s soccer matches and picking their top players.One of the men likes a talented fullback. Another wants a player who has been scoring regularly for a top second division team. And the boss is keen to sign a teenage defender whose contract is up soon.
It could be a fantasy football draft in any office in America — only these trades are real. This is the office of Traffic, a Brazilian company leading a new, and controversial, wave of investment in Brazilian soccer.
Armed with 20 million reals of their own money (about $12 million) and another 20 million reals they hope to get from investors, Traffic is buying up contracts of young soccer players all over Brazil. They then lend the players to teams, who pay the players a salary and also allow them to showcase their talents. If they are recruited by a big European team, Traffic and its partners reap the largest share of the transfer fee. (The player, as usual, gets any signing bonus, and an often hefty salary.)
“Instead of investing in the stock market or real estate,” Julio Mariz, Traffic’s president, said, “these people are investing in buying the economic rights to football players.”
Similar efforts to invest in individual athletes have been discussed in baseball in the United States and in soccer in the United Kingdom recently, but none of those efforts has taken off as they have in Brazil.
The deals are questionable; soccer’s international governing body banned third-party involvement in transfers. But without outside investment many Brazilian clubs would fail financially.
Several funds like Traffic have sprung up over the last year, and some major Brazilian companies — including supermarket chains — are creating football departments to invest in young players they hope will one day send European clubs reaching for their checkbooks.
“We’ve been investing $10 million a year, but that is growing quickly because there are big profits to be made,” said Thiago Ferro, a partner in the supermarket chain Grupo Sonda’s department of football investment. “We’re providing returns of 150 percent a year.”
In soccer (or “football,” to the rest of the world), clubs once owned the economic rights to a player under contract to their team. If another team wanted to sign the player, it had to pay his current club a transfer fee, in addition to coming to terms with the player.
But in recent years, free agency has taken hold across the soccer world. And while players’ contracts are still held by teams, as international rules stipulate, investors are getting involved.
The new model is attractive to investors because one big sale can guarantee those spectacular returns. Traffic predicts a profit of 30 percent a year, Mr. Mariz said. Grupo Sonda expects even higher returns because, unlike Traffic, it is going after a few big trades rather than a large number of midlevel players. Grupo Sonda’s projected returns are higher because the strategy is more risky.
Traffic pays dividends every six months, raised from player trades. When a player is traded, investors split the transfer fee with clubs, according to their ownership percentages.
Brazilian clubs embrace the new investor model because the clubs get to raise cash without having to trade their players as quickly or as often. And when they do, inevitably, trade the players, the huge sums, as much as $50 million, guarantee the clubs’ survival.
“If we want a decent team we need financial help,” said Carlos Augusto Montenegro, vice president for soccer at Botafogo, a Rio de Janeiro club that has at least six players on loan from funds or individual investors.
“We know they are using us as a shop window, but it is good for the player, good for the agent and good for Botafogo,” he said. “If there was another alternative we’d look at it, but this is what we have today and it works.”
Last year, Bayern Munich spent a reported $19 million for Breno (Breno Vinicius Borges, formally, but few in Brazil would know him as such), an 18-year old defender who had played just 22 games for São Paulo. Italy’s A. C. Milan paid a similar fee for Internacional’s 17-year old striker Alexandre Pato.
It is not only the giants in the big leagues of England, Germany, Italy and Spain who want Brazilians. Last year, 1,085 Brazilian players were transferred to places as diverse as Vietnam, Qatar and the Faroe Islands, according to the Brazilian Football Confederation.
It was those kinds of numbers that spurred Traffic into action, Mr. Mariz said. The São Paulo-based firm began life in the 1980s, selling advertising space at soccer grounds. It moved into sports marketing and tournament administration and now owns the transmission rights to many of South America’s biggest soccer tournaments.
It recently shifted its focus to invest more heavily in the playing side. In addition to buying two teams, last year Traffic set up a fund called Cedro Participações, using $12 million of the firm’s own money. In the months since, 18 individuals have each bought one or more shares of $120,000, taking the fund total so far to more than $20 million.
The fund is intended to operate for three years, the same time span as an average contract, and Traffic will always hold more than a 50 percent stake, Mr. Mariz said.
So far the fund has bought all or part of 36 players, and 12 of them have gone to Palmeiras, one of Brazil’s biggest clubs and Traffic’s main partner in the venture.
Traffic executives meet with Palmeiras’s directors at least once a month to discuss the club’s roster. Traffic gives Palmeiras lists of available players. Palmeiras can also ask for Traffic’s help in securing a particular star.
But there are also potential downsides, especially for fans. Investors could be tempted to sell a player as soon as his value increases, robbing the team of a key figure at a vital moment. If funds control players on opposing teams, there is the appearance of conflict of interest. And many supporters fear that people with no emotional attachment to a club might exert too much control.
Gilberto Cipullo, Palmeiras’s vice president for football, said Traffic cannot sell players during certain key periods of the season and said that if a player’s value soars then he would be sold anyway.
Still, the involvement of third parties is controversial. A scandal in Europe over who owned two Argentine players transferred from the Brazilian club Corinthians to England in 2006 prompted football’s governing body, FIFA, to ban third-party ownership in January.
Traffic gets around that rule by signing all players to their own small club, Desportivo Brasil, and lending them to partner teams such as Palmeiras, Mr. Mariz said. Grupo Sonda signs over all rights, except for those to future financial gains, to the participating club, Mr. Ferro said.
A FIFA spokesman said it had not investigated the Brazilian system because no “formal case has been brought to our attention.”
“It is clear that they are not supposed to do that, and it goes against the regulations,” the FIFA spokesman said, citing the January rule, which states, “No club shall enter into a contract which enables any other party to that contract or third party to acquire the ability to influence, in employment or transfer-related matters, its independence, its policies or the performance of its teams.”
Fund managers in Brazil said they are working within the law and stressed they have no plans to halt their dealings. With clubs desperate for cash, and investors desperate for profits, the trend seems set to continue.
“There are some irresponsible individuals who just want to make a short-term profit,” said the president of the Brazilian Association of Football Agents, Leo Rabello. “But if it is done properly then it will change football. Investment will come into Brazil.”
