Sao Paulo: Arab investors are eyeing opportunities as the Brazilian football industry begins to undergo a regulatory revolution with disastrous consequences for the sport and the businesses surrounding it.

Earlier this month, the Emirati Mubadala Capital signed an agreement with a football league formed last year in Brazil that includes 15 clubs, including clubs with the largest number of fans such as Flamengo, Corinthians and Sao Paulo.

The deal states that from 2025, these clubs will negotiate as a group their commercial and television rights in relation to the Brazilian championship. Mubadala will advise them on this process and will have the right to purchase a share of these rights.

The multi-million dollar deal includes two blocks – one housing seven First Division clubs, and the other housing eight Second Division clubs.

Two other associations – one with 24 clubs and the other with four – have reached a similar agreement with an American fund.

Experts say that such transactions will not only inject millions of dollars into the industry, allowing it to invest in infrastructure and train new talent, but will also lead to a more professional approach to management, marketing and business opportunities.

This shift is also catalysed by the 2021 law that allows Brazilian clubs, which have historically been not-for-profit associations, to become corporations.

Known as the SAF Law which was designed to help Brazilian clubs solve long-standing financial problems with the backing of private investors, it has revolutionized the industry.

“Everything is changing quickly now with SAF law and the leagues. Both elements are important drivers and will drive an unprecedented level of professionalism, business development and international exposure.

He said that football represents only 0.5 percent of Brazil’s GDP, while it is 1.8 percent in Spain.

“Soccer still has to grow in the world as a whole when we compare it to the level of entertainment and professionalism that American sports have achieved. In Brazil, this is only the beginning.”

Investors entering the field now, such as Mubadala, have great opportunities on their hands, Ferreira said, adding that around 50 clubs could be bought in whole or in part within two years.

Only a handful of them have been sold. Such is the case with Bahia, a club from the city of Salvador that was founded 92 years ago.

In May, City Football Group – owned by Abu Dhabi United Group – announced that it had bought 90 percent of the club.

The conglomerate already owns the British club Manchester City and a number of other clubs around the world, including Montevideo City Torque in Uruguay.

“Owning clubs in countries that traditionally export athletes, such as Brazil and other Latin American countries, is a strategic way to have a stable provider of talent,” Ferreira said.

Brazil is the main source of international footballers, with 1,000 expatriates every year. Lawyer and sports consultant Pedro Trengros said there are now more than 100 Brazilian players in Saudi Arabia, the UAE and Qatar.

“The presence of Brazilian athletes has been decisive in leagues around the world. This was not only the case for Pele in the United States and Zico in Japan, but also for many other players,” Trengros told Arab News.

Ferreira said that Brazilian idols in Arab countries can help increase the competitive level and attract larger audiences to stadiums, thus contributing to the sustainability of the sport.

He added, “But those countries need to continue investing in forming local athletes,” noting that some Gulf countries are doing so, given Saudi Arabia’s performance in last year’s World Cup, which included a victory over Argentina, the winner of the tournament.

Francisco Clemente Pinto, a partner at KPMG who heads the media and sports department in the Latin American country, said deals involving Arab investors and Brazilian clubs and players will continue to increase in the next few years.

“There is no doubt that other investors from the Arab world are preparing for their next moves in the Brazilian market, and it is not just a business partnership,” he told Arab News.

Arab countries have been working with Brazilian football managers for decades, and know that the South American country is an expert in creating new talent. Pinto said this is something they want to learn.

He added that the upcoming transformation of the Brazilian football industry will include initial public bids by a number of clubs, something that would attract more investments and enhance the entry of new international players.

“Clubs that are already in the equity markets tend to be better valued by potential investors, so those that are already companies now have an edge over others,” Pinto said.

A recently released KPMG study that he led showed that only two Latin American clubs are currently listed as public companies: Chile’s Colo-Colo and Universidad Catolica.

While Brazil is now the main target for investors, some of its neighbors have been constantly attracting partners, particularly countries where clubs have been allowed to become companies such as Chile, Uruguay and Mexico, said Cristian Sugoi, CEO of Global Sport Management Group, an advisory agency with offices in several countries including Argentina and Panama.

Although Argentina is a leading country in world football and the third largest provider of players in international leagues, partnerships with Argentine clubs are now out of the question.

“Argentine legislation does not allow clubs to be corporations, so partial or total takeover of teams is not possible now,” said Sugoy.

Ferreira said other relevant markets in the region include Ecuador, Colombia and Mexico.

For Trengros, the growing relationship between Arab investors and the Brazilian soccer industry could foster partnerships in other economic sectors.

Mubadala not only invests in Brazilian sports, but also operates the Rio de Janeiro metro, roads in the state of Sao Paulo, and finances a green fuel industrial plant in Bahia. “Football can promote other projects with huge potential,” he said.