Brazilian football needs a Financial Fair Play. Sports Value has produced a unique analysis of how the new regulations could be implemented

The Brazilian football market is experiencing an important moment, with the arrival of new investors acquiring football clubs’ control, which a new legal structure: Football Corporations (SAFs).

This new Sports Value ′s analysis on the implementation of a Financial Fair Play (FFP) model in Brazilian football is timely and relevant, considering the financial problems faced by many clubs in the country., especially these new Football Corporations (SAFs).

HERE THE COMPLETE ANALYSIS IN PORTUGUESE

A regulatory model adapted to Brazil could bring stability to national football, preventing the increase of debts and financial collapse of important clubs.

Lessons from the European Model

UEFA's FFP, initially introduced to reduce club losses, was successful in its early years, reversing a €1.7 billion deficit in 2011 to a €579 million profit by 2017.

However, the European model also faced challenges, such as inflated sponsorships and the return of losses in 2019, exacerbated by the pandemic in 2020 and 2021.

Losses +700 European teams - € million

Brazil can learn from these mistakes by developing a more comprehensive and modern regulation.

The Path Forward for Brazil

Inspired by Europe, but with adaptations, the Brazilian model should be inspired by the principles of European FFP, but adapted to the particularities of national football, such as the dependence on player sales.

Key Elements of the Ideal Financial Fair Play for Brazil, According to Sports Value:        

1.??Losses Control

The proposal to limit deficits to R$ -3.7 million on a two-year average is crucial to maintain the clubs financial.

Total Losses 2 years - 2022 and 2023- US$ milion

Examples of Brazilian clubs with deficits above this limit, such as Botafogo SAF, Vasco da Gama SAF, Bahia SAF, and América-MG SAF, show the urgent need for stricter regulation.

2.?? Control of Football-Related Expenses

The recommendation to limit football-related expenses (wages and signings) to 73% of revenues is a solid strategy to avoid unbalanced management.

Clubs like Botafogo SAF and Bahia SAF have expense ratios exceeding 100%, which is extremely concerning and could lead to insolvency.

These SAFs only operate thanks to the money injected by the owners.

Football Costs / Total Revenues

The average of 81% among the TOP 20 Brazilian clubs in 2023 indicates that a large part of Brazilian football is above a sustainable level.

3.?? Debt Control

Controlling Net Debts with a Debt/Revenue ratio below 2.0 is another essential point to ensure the financial viability of clubs.

Atlético-MG SAF, Cruzeiro SAF, and Vasco da Gama SAF already exceed this recommended ratio, which requires attention.

Net Debts / Total Revenues

Regulation for SAFs and Traditional Clubs

With the creation of Football Corporations (SAFs), a regulatory framework is needed to cover both traditional clubs and SAFs, ensuring no model is disproportionately advantaged.

Sanctions, just as in Europe, strict sanctions should be imposed on clubs that fail to comply with the imposed limits, ranging from fines to the prohibition of participating in competitions.

An appropriate Financial Fair Play model can be key to ensuring the sustainable growth of Brazilian football, protecting clubs from irresponsible management, and strengthening the industry.