By Samindra Kunti
August 27 – Brazilian football has been in a grim state ever since Brazil’s unforgiving 7-1 defeat to Germany at the 2014 FIFA World Cup, but slowly leading club Flamengo is showing the way forward with its sound financial management under chairman Eduardo Bandeira de Mello, resulting in substantial pre-tax profits.
The national team’s collapse against Germany did not serve as a wake up call for the Brazilian Football Confederation (CBF), where the idea of modernization is loathed. At present, Brazilian clubs are mired in public and private debt, hemorrhaging players to foreign clubs and averaging a gate of just 17,256 at the midway point of the domestic season.
The Brazilian government is trying to remedy the situation with medida provisoria 671, which will allow for the refinancing of Brazilians clubs’ debts, but demands better management and more transparency from the clubs.
“It’s a historical problem of management,” said Amir Somoggi, a finance and marketing consultant who works with some of Brazil’s biggest soccer clubs. “The football part, notwithstanding its many deficiencies, is doing reasonably well, but the budgeting, spending and lack of revenue are the big problems.”
“In theory medida provisoria 671 can help, but it has to implement a more business-oriented vision,” continued Somoggi. “That a maximum of 80% of the annual gate receipts, up from 70%, can be spent on professional football allows the clubs to spend even more than today.”
Flamengo, Rio de Janeiro’s leading club, is trying to turn the tide after years of financial mismanagement. Chairman de Mello keeps the club’s purse in check and Flamengo is now projected to close 2015 with a pre-tax profit of €22 million, equalling the pre-tax profit of trio Sao Paulo clubs together – Corinthians, Palmeiras and Sao Paulo.
Palmeiras is projected to make a €15.5 million pre-tax profit, following the inauguration of its new stadium. Corinthians will make a €4.3 million pre-tax profit and Sao Paulo just €2.2 million, according to a study by Brazilian bank Itau.
Flamengo received 20% more income from gate receipts this season, while they kept expenses at a level similar to last season.
“The financial management is impeccable, putting the club organisationally back on the rails, but it’s time to pursue sporting success now,” analyzed the study. “It doesn’t suffice to put the club back in order. Good management requires an executive and organizational timeline so you can actually put together a team that could win titles, for without them the fan pulls away, sponsors depart, revenues fall and all the effort will have been wasted.”
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