Brazilian soccer clubs flexing new financial muscle

Star striker Carlos Tevez's transfer from Manchester City to Corinthians in São Paulo, unthinkable 10 years ago, is now a real possibility thanks to the strong real and Brazilian teams' new business professionalism.

Forget iron ore or soy beans. For most of the past decade, football players have arguably been Brazil’s most visible export.

That, though, is starting to change thanks to the strength of the Brazilian currency and the new wave of hard-nosed business people running Brazilian clubs.

This week, Carlos Tevez, an Argentine soccer star rated one of the best players in Europe, is doing the unthinkable and negotiating a transfer from his English club, Manchester City, to Corinthians, São Paulo’s best supported club.

It marks the first time a non-Brazilian star at the height of his career is considering leaving behind the glamour of Europe’s big leagues to return to South America.

Tevez is a distinct case because he wants to be closer to his family in Argentina. And he has already enjoyed one successful spell with the Corinthians club.

But the move is only even being discussed because Brazil’s currency, the real, is at its strongest level against the dollar since 1999. That means everything from iPads to jeans to tomatoes cost a fortune. (A study released last week by the Mercer business consultancy rated São Paulo and Rio de Janeiro as more expensive cities for expats to live in than New York or London.)

Most importantly for South American soccer players, it means Brazilian clubs can rival European salaries. Several top stars have been lured home by the powerful real in recent years, including former World Cup winners Ronaldo and Roberto Carlos to Corinthians and Ronaldinho Gaucho to Flamengo.

“The euro was 4 or 5 [reais] and now it is 2.3,” said Carlos Falcão, vice-president of finance for the Vitória club of Bahia. “A club today can make proposals to European clubs at favorable exchange rates.”

Mr. Falcão said another important factor is the professionalization of Brazilian football. The old generation of amateur administrators is slowly being supplanted by professionals who have experience in banking, broadcasting, and marketing.

Vitória, a mid-level club, saw its annual income rise from just 6 million reais in 2006 to 42 million reais last year, and it will increase further thanks to the new TV deal that will see their share of broadcasting revenues increase by 25 percent.

The new television contract allowed clubs to negotiate their deals individually and will replace the current collective agreement. It means all clubs, and especially ones in major markets like Corinthians, can double or triple what they get from broadcasters.

That is a huge draw for sponsors, and they are getting involved in soccer as never before. With almost 50 million Brazilians entering the middle and upper classes since 2003 thanks to a booming economy, there is more money around and sponsors are an essential part of arranging any deal.

“Brazil is going through a very positive economic phase,” said Alvaro de Souza, a former Citibank executive who now works for Pele’s former club Santos. “Thanks to a lot of factors – reduced inflation, social welfare programs, easier credit for low-income families – there are 100 million consumers. And there are more brands looking for a piece of that market.”

As long as the real stays strong, Brazilian soccer clubs are likely to become bigger and richer. The revenue of Brazil’s 12 biggest clubs doubled over the seven years to 2010, according to a study released by Brazilian audit and consulting company BDO RCS, and it will likely rise further and faster.

That doesn’t mean they’ll be signing Lionel Messi or Cristiano Ronaldo just yet. But they might soon have the money to start thinking about it.