The English might well take credit for the birth and creation of modern football, but for many the soul of the game originates slightly further afield. The World Cup of 2014 brought the game back to it’s beating heart, the carnival atmosphere of a Brazilian tournament that showcased the vibrancy of the most successful nation in the history of the game.

As a fortunate visitor to the country that summer, football was difficult to avoid. From games played on the dusty streets of the favelas to the iconic beaches of Ipanema and Copacabana, football is a cultural phenomenon in this part of the world. Yet despite the impressive investment that comes with a FIFA tournament, there was always a sense of a domestic game in serious decline. The Brazilian side that became a national embarrassment at the hands of eventual winners Germany was not a team that plied it’s trade in the crumbling facilities of the domestic Brasileirão. Instead what we saw was evidence of an exodus of domestic talent from these shores. The Brasileirão – and indeed many other South American leagues – has fast become the talent incubator for the rest of the world, much to its own detriment. Following their first Copa Libertadores title in 2013, Corinthians was ranked 24^th in the Deloitte Football Money League with €113.3m in annual revenue. Since their entry in 2014, no Brazilian club had featured in the top 30 of the rankings: that was until legislative change came in 2021.

Brazilian players were by far the most transferred in 2021

Source: FIFA Global Transfer Report 2021

Cumulatively Brazilian players were only  6^th in total receipts from outgoing transfers, despite having significantly more transactions

Source: FIFA Global Transfer Report 2021

One reason for this decline has been the antiquated approach to club ownership which has restricted foreign investment. Brazilian domestic clubs have historically been structured as non-profit organizations, led by club presidents elected by the club’s members on a term basis – often 3-5 years. This has often led to periods of short term borrowing to achieve election promises followed by rapid sell-offs of the clubs playing assets in order to balance the books. The structure encourages short-term risk at the expense of having a balanced long-term financial vision for the club.  The figure below highlights the regularity in which the league as a whole runs a financial deficit largely as a result of this ownership structure. Previous legislative changes have done little to impact the association format of Brazilian clubs (Zico law 1993 & Pele law 1998), but the ‘SAF law’ of 2021 has finally created the shift in corporate structure that its designers had envisaged.

Source: Ernst & Young

What is the change in regulation?

Law No. 14,193/2021 (‘SAF Law’), allows for the professionalisation of Brazilian football clubs with the creation of ‘Sociedades Anônimas de Futebol’ or ‘SAF’. The new law allows for the transformation of clubs from civil associations into football corporations functioning as limited liability entities, paving the way for external investment. An additional benefit is the establishment of administrative governance standards with an added accountability to management over financial decisions.

For clubs that opt for this new structure, all football-related activities are segregated and assigned directly the new SAF. Current debt stays with the club, which retains an obligation to settle it, although the SAF could still be held liable if they fail to pay the agreed remuneration outlined in their agreement with the club. Those that opt for the ‘SAF’ model are also permitted to issue private bonds as a capital raising alternative. Generally speaking, these changes allow Brazilian clubs to align their structure with the most powerful global organizations in world sport, and more importantly access the kind of investment that could rejuvenate the Brazilian domestic game.

So has the investment materialised?

In short, yes. There has been a significant surge in investor interest as a result of the legislative changes in 2021. Several deals have been completed, and many more are still in the process of being approved. What is particularly noteworthy is the interest from foreign ownership groups that are aiming to supplement existing sporting portfolios with access to the Brazilian football market.

Botafogo’s takeover in January 2022 by the US investment fund Eagle Holding, led by John Textor, was perhaps the most dramatic deal of all. The purchase was signed ahead of Botafogo’s return to the top-tier following promotion from Série B in 2021. That promotion alone potentially saved the club from bankruptcy, but it was what happened in the ensuing seasons that truly grabbed headlines. First in 2023 they suffered the ignominy of one of the worst title collapses in Brazilian history. Then they managed to follow it up in 2024 by completing the job they failed to achieve the previous year to secure their 3^rd ever league title.

To date, 5 of the leagues 20 clubs have opted to adopt the new SAF structure – Red Bull Bragantino have a different LLC structure:

• 777 Partners: Majority shareholders of Vasco da Gama
• City Football Group: Majority shareholders of Bahia 
• Galo Holding: Majority shareholders of Atlético-MG 
• Eagle Holding: Led by John Textor, this US investment fund took over Botafogo in 2022 
• Ronaldo: Bought a controlling stake in Cruzeiro through his Tara Sports company in 2021 

Interestingly, Brazil’s largest 3 cubs in terms of revenue generation (Palmeiras, Corinthians and Flamengo) are not featured on this list. This is likely because the current structure actually works for them, and in their cases it is far more prudent to see how the changing structure impacts some of the smaller clubs in their division before opening themselves up to change. Also for consideration is the potential breakaway formation of a ‘Super League’, akin to the creation of the Premier League in England, which could be just as transformational as the legal changes that have already been delivered domestically.

Brazil may well represent the heartbeat of football, but the structure of it’s domestic game is antiquated and restrictive. The ‘SAF’ legislation will likely be the first step in transforming the domestic game, but for a country with no cohesive domestic broadcast deal and just 2% of its revenue sourced internationally, there is clearly a long way to go.