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Soccer-Debt-ridden Brazilian clubs facing reality check

Reuters

By Andrew Downie

SAO PAULO, Jan 27 (Reuters) - Brazil's leading clubs are enjoying bumper revenues but are failing to address crippling debts and cannot pay players on time - a paradox that highlights the problems affecting the domestic game of the World Cup hosts.

Corinthians and Atletico Mineiro were the last two winners of the Libertadores Cup, South America's version of the Champions League, but both have steered into choppy waters.

Earlier this month Atletico president Alexandre Kalil admitted "we are having problems with players' salaries".

Corinthians also announced they owe four million reais ($1.67 million) to three players, half of that to Alexandre Pato, the former AC Milan striker who became their biggest ever signing last year.

Even Atletico Paranaense, long recognised as one of Brazil's best run clubs, are behind on payments "for the first time in their history" according to club president Mario Celso Petraglia.

When Brazilian clubs repatriated players like Pato and Ronaldinho and signed foreigners Clarence Seedorf and Diego Forlan there was a sense of a new beginning in Brazilian football.

However, it looks instead to be a false dawn with clubs spending impetuously and not using increased income to pay off debt.

"You can say to me we need to live within our means but if we don't spend then we'll get relegated and the fans will lynch me," Manuel da Lupa, chairman of Portuguesa for nine years, told Reuters.

"You don't want to do it but you have to. And that obviously has an impact on the club's financial health."

Portuguesa, a small club in Sao Paulo, owe money to several players but the clubs making the headlines are more significant.

Corinthians are Brazil's biggest club in terms of revenue, with income of 359 million reais in 2012. Atletico Mineiro's income was 163 million reais in 2012 and probably much more last year after their Libertadores triumph.

However, even though the income of Brazil's top 24 clubs more than doubled between 2009 and 2012, thanks largely to renewed TV deals and more sponsorship, debts went from a collective two billion reais in 2010 to three billion two years later, according to a study by ItauBBA, a leading investment bank.

"Clubs are in debt and they don't pay salaries and it is going to cost them in the future because they will be taken to court and when they are ordered to pay they'll have to pay what they owed plus compensation," said Amir Somoggi, a finance and marketing consultant who works with some of Brazil's biggest clubs.

PLAYER UNREST

Last season, several first division sides admitted they had not paid staff on time and players at Botafogo, Vasco da Gama, and Portuguesa all refused to attend pre-match get togethers in protest.

Players at Nautico also complained the club owed them in back salaries and bonus payments and the situation at the Recife-based club prompted Brazil's new players union to threaten an immediate strike unless the Nautico players were paid promptly.

Highlighting the disarray inside some clubs, officials at Nautico said they did not know how many players were due money or had sued the club to get their cash.

"We know we owe money and we are negotiating with several players," said Carlos Lindberg, the executive superintendent at the club. "But we're still carrying out an audit and we don't yet have a clear sense of what the club's financial situation is."

The players' union, dubbed Common Sense FC, say the issue is an increasingly serious one and want the Brazilian Football Confederation to punish clubs - perhaps by docking points - who do not pay their players on time.

"The objective of financial fair play is to guarantee mechanism to ensure salaries are paid on time and encourage clubs to compete using only the revenue they bring in," the group said in a recent statement.

FAN PRESSURE

The root of the problem is overspending caused by pressure from fans, Linberg and da Lupa both said.

"The problem is that football is about passion," said da Lupa, who stood down as chairman of Portuguesa on Jan. 1. "We have a budget and we know we have to cut costs. But Brazilian fans aren't interested in planning because they just want to win at all costs."

Da Lupa said when he took over at Portuguesa in 2005, the club's debt was 300 million reais and of that, 60-70 million was owed to players in back salaries, image rights and compensation payments.

The club struck a deal with the lawyer for 19 players and has paid up its debt with 12 of them. It is still paying out around 267,000 reais a month to settle with the remaining seven, he said. (editing by Justin Palmer)

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