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Manchester City leading the way with Brazil ripe for investment

By Lake Tororó in the capital of Salvador, the city in northern Brazil that was the nation’s first capital, sits the Arena Fonte Nova, rebuilt for the 2014 World Cup finals, home to the newly promoted top-flight club EC Bahia, and a selling – point for any prospective owner. million

That new owner of EC Bahia as of last week is City Football Group, the Abu Dhabi mothership that controls Manchester City, New York City, Melbourne City and now ten further clubs from Japan to Uruguay, China to India.

Another week, another club added. Yet for all CFG’s global expansionism this one is different. Even if Abu Dhabi had not launched CFG ten years ago, they might still have considered buying in Brazil.

CFG is not the first to take advantage of new legislation enacted by the Brazilian government allowing foreign ownership of debt-laden, premium-heritage, member-owned Brazilian clubs.

It will surely not be the last. The new owners of Chelsea and Newcastle United have both expressed an interest in multi-club systems – a global format that is impossible for domestic leagues or associations to regulate satisfactorily.

In Brazil, the possibilities are endless, and in the post-Covid world where Brazilian club finances are at breaking point, the game’s big money has spied its chance to move in.

This is partly about access to one of Brazil’s great natural resources: its endless supply of football talent. City’s Champions League opposition this week, Real Madrid, have thrived at the elite end of that market.

Vinicius Junior, Rodrygo, and the teen prodigy Endrick were sourced by the club’s well-established South American scouting network. Real have had a few missteps too but generally benefited from a less exacting work permit system in Spain. What they do not have is a top-flight club in Brazil through which to acquire and filter talent.

  Vinicius Junior - Manchester City venture into Brazil and it's not hard to see why - Getty IMages/Eric Alonso

Vinicius Junior – Manchester City venture into Brazil and it’s not hard to see why – Getty IMages/Eric Alonso

The new post-Brexit immigration rules for professional footballers give Premier League clubs the leeway to exploit the South American market, with a revised deal with the Football Association potentially making that smoother still.

But for CFG and others this move goes beyond signing footballers to the potential of the huge Brazilian football market. Having struggled with corruption and poor administration, Brazilian football says it wants to change.

It is pursuing a rights model similar to the Premier League and has the benefit of the famous South American continental competition, the Copa Libertadores, and a Europa League-style second offering. South America also has six places in the expanded Fifa Club World Cup that begins in 2025. The big club fanbases are huge, and EC Bahia are no exception.

Investors see potential for growth in the Brazil football broadcast rights market which will move to centralized selling in 2025, although that will take time and money. Brazil has big name clubs that resonate around the world. It has thousands of players from among whom there might be the next world star.

The $200 million fee paid by CFG as reported in Brazilian media is understood to include future investment as well as acquisition. CFG will not disclose how it valued the club, nor how much of that $200 million is to clear debts. Revenues are unlikely to be much above £40 million. CFG will feel its expertise can squeeze more.

In August 2021, the Brazilian government enacted the Sociedade Anonima do Futebol (SAF) legislation to try to save indebted member-owned democratic clubs, many of which had large outstanding tax liabilities.

The assets of the club would be transferred to a new company which could be sold on the proviso that the new owner would reach an agreement with creditors.

It is a de facto privatization of clubs founded in the early 20th century as multi-sport clubs, which provided sporting facilities to members and grew into some of world football’s most famous names. Ten percent of SAF-bought clubs will remain in the hands of the fans

The first wave of investors has already arrived. The original Ronaldo – R9 to friends and admirers – has bought 90 percent of his former club Cruzeiro. The US investor John Textor, who owns the French giant Lyon, as well as a stake in Crystal Palace, and others, has 90 percent of Botafogo.

CFG wants to grow their brand in South America

Others will surely follow. With CFG’s presence in Brazil, the world’s greatest football-producing country, it may be that their biggest rivals cannot afford not to.

Who wins out of it all? Certainly CFG, with Abu Dhabi’s endless resources, and a well-honed global operation. CFG refutes all suggestions that its network is used to transfer costs away from City’s profit and sustainability liabilities.

It sees CFG as a way of growing the City brand. EC Bahia will give them more of that soft power. If it also gets them a world-leading talent for a fraction of the price they would have to pay later in his career, then the project will have been worth it.

Covid brought Brazilian football’s financial problems to a head. The game has been struggling with problems as basic as a poor quality of pitches and a blood-lust for managerial sackings. Democratically-elected club presidents worked for the short-term. Government and banks dared not foreclose on indebted clubs that were respected local institutions.

Tt is one more death knell for member-owned clubs in the modern era. EC Bahia’s sale to CFG was approved by a huge margin in a poll of its members. The newly-relegated EC Juventude in the country’s south have been offered on similar terms this week.

Whether blue-chip clubs like Flamengo are allowed to pass into the control of foreign investors will likely be a political decision. Nevertheless, change is happening fast. Even in Spain, the socios of Barcelona were asked last week in a member questionnaire how they would feel about the privatization – part or whole – of their club.

At Botafogo, Textor was welcomed like a hero. Since then he has attracted criticism for switching the direct pitch to a synthetic surface so he can use the stadium for concerts to drive revenue.

Of all CFG’s clubs it has never taken on a club this historic or with such a large fanbase since it bought City. It is a long road to the modernization of a nation’s football system. If, indeed, modernizing is not a euphemism for something else.

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