SPORT-BRAZIL/EU: Football’s Informal Economy Under Fire

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 20 2000 (IPS) - Brazil and the European Union (EU) are pursuing initiatives to bring the big business deals of football within the framework of labour, tax and financial laws that govern the formal economy.

These measures are especially important considering Brazil is the world’s leading “exporter” in the international transfer of players between football clubs – a process that mobilises millions of dollars -, while the EU is the top “importer.”

The public and sports journalists tend to speak of the “buying and selling” of players, as if they were property, but the money paid for a transfer is defined officially as a fine for breach of contract between the player and the club he leaves.

Most of the world’s top football players are concentrated among a small group of European clubs, primarily in Great Britain, Italy and Spain.

Brazil’s National Congress this week set up two Parliamentary Investigative Commissions (CPI), one in the Chamber of Deputies and the other in the Senate, with the mandate to look into the numerous charges and suspicions of crimes involving the Brazilian football industry.

The European Commission, the executive body of the EU, is also studying ways to ensure that the bloc’s laws are applied to the transfer of football players.

The concern about the legality of finances grew more urgent three months ago when it was announced that Spain’s highly indebted club, Real Madrid, had acquired a Portuguese player, Luis Figo, for 53 million dollars.

In addition, there are rumours that an Italian football club is preparing to pay much more to bring Brazilian player Rivaldo into its fold. Rivaldo currently plays for the Spanish club, Barcelona, and was recognised last year as the world’s best player.

The current system of transfers and the fact that the contracts tie players to certain clubs violate labour and competition rights, as well as the principle of free movement of players within the EU, says the European Commission.

Joseph Blatter, president of the Federation Internationale de Football Association (FIFA), which governs the sport worldwide, agreed to negotiate the partial adaptation of its system to EU norms, but demands “exceptional treatment” for football, though many of the larger clubs are legally defined as companies with shares traded on the stock market.

The negotiations are an attempt to maintain the compensation payments for breach of contract to the clubs transferring the players, but with a sharp reduction in the sums paid.

The fact that the EU is the principal “import market” of players will mean that the effects of changing the player transfer system will extend to the “exporting” countries as well, mostly in Latin America.

The Brazilian parliament will also investigate player transfers that have involved large sums of money, funds that entered the country but for the most part were not officially reported.

Brazil’s Central Bank has uncovered financial manoeuvres in player transfers that violate national laws on tax evasion, and in one such case imposed a fine of 1.35 million dollars.

Financial crimes related to player trading will fall under the jurisdiction of the Senate CPI, while the congressional deputies are to investigate the contract that made the transnational sports shoe corporation Nike the official sponsor of the Brazilian national football team.

Nike agreed to provide 400 million dollars to the national team over a period of 10 years in exchange for the commitment that the players would use Nike products and serve as a vehicle for the company’s advertising.

The Brazilian Confederation of Football, which oversees the sport nationally, admitted that the contract with Nike includes five secret clauses. According to Aldo Rebelo, president of the Chamber of Deputies CPI, the first objective of the commission will be to dig up and reveal those clauses.

The 25-member CPI of parliament’s lower house also seeks to determine whether there has been undue interference by Nike in the national team’s sports affairs. There have been insistent rumours circulating that the transnational required, for example, that Brazilian player Ronaldinho to play in the final game of the 1998 World Cup against France.

Ronaldinho, famous for his goals made for the Italian club Inter, and considered at the time to be the world’s top player, was one of the stars to receive a Nike endorsement contract – but he had hurt his knee and had suffered convulsions just hours before the final game of the World Cup.

Brazil lost that match by three goals to zero, and many attributed the team’s poor performance to the disturbances caused by pressure from Nike and to the fact that Ronaldinho had played under while suffering physical ailments.

It is likely that the bigger scandals will arise from the work of the Senate CPI, given that Brazilian football is governed by non-existent norms of the informal economy, and that financial irregularities seem to plague the sport.

Alvaro Dias, president of the Senate CPI, announced that the first ones invited to testify before the commission are the former coach of the national team, Wanderley Luxemburgo, and his former secretary and companion, Renata Alves.

Alves accuses Luxemburgo of having taken advantage of his post to wield power in obtaining monetary commissions in the transfer of players.

Tax evasion is a common offence in the world of football. Luxemburgo himself admitted to having committed the crime, and owes the government approximately 700,000 dollars.

Brazilian player Romario, considered number one in the world when he played for Spain a few years back, faces charges from fiscal authorities for evasion of 540,000 dollars in tax payments.

The Senate CPI, to begin work at the end of the month, also plans to investigate reports of fraud in three main areas: in the transfer of players abroad, in the statements of income from ticket sales, and in television contracts to broadcast football matches.

Meanwhile, the Brazilian Minister of Social Security, Waldeck Ornellas, decided to put an end to the exceptions his ministry has made for the football clubs, considered non-profit institutions, in making social security payments.

The contributions of the clubs to the nation’s social security system are currently limited to five percent of the income from football game ticket sales, while companies in general contribute 20 percent of the salaries they pay their workers.

Ornellas stated that the benefit granted to the football clubs has meant that social security did not take in some 33 million dollars this year that it otherwise could have.

In reality, the total not paid is much higher, as the football clubs are also among the country’s biggest debtors in defaulting on their social security payments.