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Friday, January 18, 2019
SANTIAGO, Jul 15 2005 (IPS) - Chile’s football teams are counting on more than victories in the stadiums to pull them out of the crisis facing professional football in this South American country. They have started to look towards the stock market as well.
But while Colo-Colo, the most popular Chilean team, is enjoying the success of its debut on the Santiago Stock Exchange, the union of professional football players (SIFUP) has threatened to go on strike over unpaid wages before this weekend’s games that kick off the first division Closing Tournament, in the second half of the season.
Although football is the most popular sport in Chile, many complain that the financial management of the clubs is semi-professional, building up deficits from year to year, which leads to frequent delays in the payment of players’ salaries and contributions to their retirement funds.
SIFUP president Carlos Soto reported that there are nine top division clubs with long-time debts, that owe an average of two months in outstanding wages.
These include the University of Chile club, which disputes the top position in terms of popularity with Colo-Colo, and Cobreloa, the champion of last year’s Closing Tournament.
But Colo-Colo, a 23-time local champion, is finally breathing easy. It is no longer on the list of clubs that have fallen into arrears, and has pulled out of the economic crisis that drove the club into bankruptcy in 2002.
Jun. 24 became another historic date for Colo-Colo as the day the Blanco y Negro SA company made a public offering of 100 million shares in the club, in search of fresh money to pay down debt and invest in improvements.
"This has been one of the most successful recent stock market operations," Jaime Morgado, a capital market analyst, told IPS. "The shares, valued at 180 pesos (32 cents of a dollar) when the bidding opened, immediately climbed to 240 pesos, and a week later were trading at 297 pesos."
The value of the shares offered by the club through Blanco y Negro SA is now 57 percent higher than the original price. In just one week, sales totalled 20 million dollars, equivalent to 63 percent of the total value of 31.7 million dollars set for the club on the stock market.
With the rise in share price, the club’s net worth has also gone up, and Blanco y Negro SA is in a position to pay off debt to creditors, which amounts to 13 million dollars, and make investments to improve infrastructure and build up the team.
Cristián Varela, president of Colo-Colo and a member of the board of directors of Blanco y Negro SA, told the economic on-line publication The Moroso that the stock market offering was conceived of as a way to save the club without selling off any more of its assets, especially the Monumental Stadium in the Santiago district of Macul.
"Selling off the stadium in Macul would have been a break with the club’s history, with a tradition replete with outstanding sports achievements. We must not forget that Monumental was the site of Chile’s greatest football victory," said Varela, alluding to Colo-Colo’s 1991 triumph in the Copa Libertadores de América, South America’s premier club competition.
Colo-Colo has now hired a new manager – Mirko Jozic of Croatia, who as coach in 1991 made the team the only Chilean club to win the Copa Libertadores.
Jozic has set up a team of coaches comprised of three long-time Colo-Colo star players: Ricardo Dabrowsky of Argentina and Chilean footballers Jaime Pizarro and Leonardo Veliz.
The club’s short-term investments will include the upgrading of the Monumental Stadium, with improved entryways, installations and services, and especially security, in order to more effectively curb the violence by the "barras bravas", as the local hooligans are known, and allow football matches to become outings fit for the entire family.
A new law that will go into effect in 2006 will make it possible for professional football teams to register as incorporated sports clubs, with the aim of improving management and financial oversight.
Colo-Colo is not actually an incorporated sports club, but is owned by its members, who authorised the directors to grant a concession to Blanco y Negro to run the club.
Incorporated sports clubs have a long history in Europe, with cases like Real Madrid in Spain, which is controlled by its members.
In Britain on the other hand, more open business structures pave the way for cases like the purchase of the Chelsea club by Russian magnate Roman Abramovich or the acquisition of 98 percent of the shares of Manchester United, the world’s richest football club, by U.S. tycoon Malcolm Glazer.
In Italy, although clubs are listed on the stock market, large consortiums maintain tight control over the leading teams, as in the case of carmaker FIAT with Juventus or media tycoon Prime Minister Silvio Berlusconi, who owns AC Milan.
In Latin America there are a number of clubs owned by companies, but the relationship usually involves magnates financing teams as sponsors or through advertising.
In October 1983, the British club Tottenham Hotspur became the first in the world to float its shares on the London Stock Exchange.
Colo-Colo has now become the pioneer in South America in offering shares on the stock market.
Opinions as to the effectiveness of converting sports clubs into corporations are divided, because although more efficient administrative and financial management is needed, putting a club in the hands of a management team does not guarantee success on the field.
Magallanes, one of the country’s oldest teams, which was founded in 1897, become a corporation in 1999. Deportes Copiapó, in the city of that name 800 km north of Santiago, and the Palestino and Santiago Morning clubs in the capital, later followed suit.
With the exception of Palestino, the other three are B Division clubs, and although Santiago Morning has a good chance of moving up to the A Division, Magallanes and Deportes Copiapó have not found a successful combination of good management and victories on the field and have remained toward the bottom of the table in the past few years.
"Becoming incorporated is not a magic formula. Here, as everywhere, it’s the market that rules. Colo-Colo made a successful debut on the stock market because of high expectations for future earnings on the part of those who bought the shares. But that isn’t the case for small clubs without huge followings," Sergio López, a long-time Magallanes fan, commented to IPS.
"I’m a fan of a club, not a company," Tania Cevallos, a 17-year-old supporter of the University of Chile team, told IPS. She is an active member of the "Los de Abajo" fan club, which is staunchly opposed to the team becoming a corporation.
Nevertheless, since witnessing Blanco y Negro SA’s success in listing Colo-Colo shares on the stock exchange, the president of the University of Chile team, Lino Díaz, has also been considering the possibility of floating shares on the stock market, to cover the club’s deficit, estimated at 19 million dollars.
René Orozco, a former president of the University of Chile team, is strongly opposed to the proposed "business deal" as he calls it, warning that the day the club becomes incorporated it will lose its name because its link with the country’s leading university will be dissolved.
One of the leaders of "Los de Abajo", Alcides Castro – better known as "Anarkía" – agrees with Orozco. "We bought shares in Colo-Colo to show that incorporated societies don’t respect the identity of the club or the passion of the fans," he said in an assembly held this month.
Those interested in listing the University of Chile team on the stock exchange are mainly a group of businessmen with ties to the club, including Díaz himself, and Marcos Kaplún, Carlos Heller and José Yuraszec.
Yuraszec, a leader of the right-wing Independent Democratic Union (UDI) party, served as a government official during the dictatorship of General Augusto Pinochet (1973-1990) and played a decisive role in the privatisation of Chile’s energy companies.
He later became the country’s "electricity czar" as a senior executive and shareholder in the new private consortiums.
On Jul. 8, the Supreme Court upheld a 150 million dollar fine for Yuraszec and five other former executives of the Enersis electric company, who in 1997 arranged the company’s sale to Spain’s Endesa-España, raking in large profits at the expense of small shareholders.
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