Monday, July 28, 2008

An Ugly Development in the Economics of Soccer in Brazil

As bad as the story about Dominican baseball players was, this story about a private company in Brazil buying soccer players' contracts and reaping a profit if they make it big really makes me uncomfortable. Basically, Traffic, a private company, is buying up the contracts of young, promising soccer players, and then making deals with Brazilian teams to let these young men pay. The teams pay the salaries, and by playing on big teams in Brazil, they have the chance to get the attention of European clubs and maybe get signed there. It may sound good at first, but I have a lot of problems with what Traffic is doing.

Firstly, as the article points out, buying players' contracts and then reaping the rewards of the transfer to Europe (something required in soccer) really pushes FIFA's rules banning third parties in soccer (in an effort to effectively prevent what is happening in the Dominican Republic). However, what really makes my skin crawl is this: "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.

I'm not so naive as to pretend that there is no sport where players aren't used to make a private profit, and many sports probably privately view atheletes as these types of "economic investments;" indeed, the notion behind signing a Lebron James or an Alex Rodriguez is certainly in part the hope that the name will bring fans to the games, thereby helping the private ownership to turn a profit. But the money remains in the hands of those who are nominally the owners; it behooves them to try to invest in the team. Ceratinly, not all owners will use the money they make to improve the team (the Pohlads come to mind here), but by and large, the system seems to work for the most part (though admittedly because organizations like MLB, the NFL, and the NBA put into effect things like the luxury tax or the salary cap to help self-regulation). But by letting a third party enter into the equation, this simply kicks up to another level the ideological exploitation of players for the hopes of personal profit for a private company.

And this leads into my third problem with this setup - it takes the profit out of the hands of the clubs. The Times treats this like a new form of free agency, but that isn't really accurate. When European clubs want to sign Brazilian players from other clubs, they have to pay the player's previous club the "transferral fee." Therefore, if a player does great but decides to go on to play in Europe, his club is financially rewarded for its loss. This is huge, because soccer clubs aren't like baseball or football or basketball teams in the U.S. Each club is literally that - a club open to public, where your kids can learn to play soccer, basketball, learn gymnastics, learn to swim, and any number of other physical activities, as well as social events. These transferral fees in part help the clubs keep those activities going. Certainly, soccer gets the bulk of the money from these deals, but it doesn't just go there. And while you do have corruption among many of the clubs' boards where personal gain may be happening, at least some of the money has to go to the clubs. When an organization like Traffic becomes involved, that's no longer the case, and the club loses a major source of income for its programs. And of course, because soccer is first, that means lesser (but still important) activities like swim lessons, basketball, and all the others, will be cut first. And of course, previously, if a club was selling a lot of tickets to games and making money for the club due to a popular player, and that player then went to Europe, the transferral fee would help cover what might be an initial drop-off in game attendance. But with tactics like Traffic's, that's no longer an option, either.

Botafogo's president says there is no other way, given the rising economy and the growing difficulty of getting good young players to stay in Brazil long enough, but I can't believe this. He's absolutely right that it is increasingly rare to see young players in Brazil staying very long (when a young star of 17 years old or less emerges, the question is never "if" he'll go to Europe, but "when," "Where," and "for how much), but Traffic's operations do nothing to stem that flow from Brazil for bigger money. I really don't know what else can be done, either, because the clubs in Europe and in other parts of the world just make more money, and can offer more, than Brazil can; in some ways, the sporting world is one of the final arenas where old imperialist relations still play out regularly.

The article closes with Brazil's Football Agents president claiming that, while Traffic's approach is flawed, this could help gain investment for Brazilian clubs. To put it lightly, I'm not convinced. Rabello's partisanship as head of Football Agents should be clear enough, but additionally, agents and third-part groups simply will not make the clubs any money. They will poach young players, lease them only until they can make the maximum profit, and then send them to Europe, reaping the rewards while Brazilian football clubs suffer even further and witness a greater decline. Brazilians are the greatest soccer players in the world, but issues like this make the prospect of Brazil's national football league dim indeed.