The Economist: how Argentine soccer clubs resist privatization

The plan of Javier Milei is for teams in difficulty to attract foreign investments. On a pleasant afternoon in late February, the two largest soccer teams in ArgentinaRiver Plate and Boca Juniors, faced each other in the superclásico, the name given to all matches between these two teams.

This edition of the Buenos Aires derby, which has 111 years of history, ended with a 1-1 draw. The derby is legendary among football fans around the world. There are several packages, with prices well over US$1,000, offered to tourists to attend the games.

The superclassic is the bright spot in a picture that is generally gloomy. Argentina’s soccer clubs are declining more and more, even though its national team is among the best in the world. Fans point out several problems that plague them: they have lost several games against Brazilian teams in the Copa Libertadores (the South American equivalent of the European Champions League), the clubs are not managed well and many Argentine players leave for clubs foreign.

The newly elected president of Argentina, Javier Milei, believes that his country’s soccer clubs are in this terrible state due to a lack of private investment. By law, clubs are constituted as non-profit associations and are owned by their members. These civil associations generate most of their income from ticket sales and television broadcast rights.

Many struggle to survive. Last year, the situation became so precarious for the Independiente (one of the “big Five” teams of Argentina) that a social media influencer organized a crowdfunding campaign to help cover the club’s massive debts.

Milei He believes he has a strategy to quickly fix the situation: modify the legislation so that clubs can become sports corporations. He has said this could attract billions of dollars from wealthy Arab and European investors, and even claims that British club Chelsea is already making inquiries about possible opportunities.

“The fast money”, as described Milei, it would bring great benefits. In his opinion, if your team wins, who cares who owns the club?

Well, it turns out that many Argentines care, a lot. The Argentine Football Association, clubs and fans have expressed their outright opposition to Milei’s proposals. He worries these measures will change the role of clubs in their local communities. Soccer clubs in Argentina, in general, offer their facilities for dozens of other sports, in addition to educational and health services, and there are even some mergers with a university. A private owner might not consider such offers profitable.

Another concern is that new owners want to buy Argentine clubs with the intention of turning them into hotbeds of talent for more lucrative leagues in Europe. This ownership model would increase the flow of players to foreign clubs rather than stopping it.

The courts are already involved in the matter. On January 30, a federal court issued an injunction in response to a claim by a Salto league that the government’s privatization plans are unconstitutional.

The judge ruled that allowing football clubs to become public limited companies could undermine civil associations and their broader participation in society. Other cases are likely to come before the courts as football clubs want to stop Milei’s plans.

Even if Milei gets his reforms approved, it is not likely that there will be many investors eager to acquire a stake in clubs in the interior of the country. Other countries in the region have experimented with similar measures in the past, notably Brazil, which opened its clubs to private investment in 2021. Only a few Brazilian clubs have received foreign investment since then, and at percentages nowhere near what they have mentioned Milei.

Furthermore, there are several specific factors of Argentina that could discourage investors. There are problems of violence between rival barra bravas (groups of aggressive fans). New owners may worry that they will suffer some form of retaliation for making unpopular decisions. “These are the most visible businesses in Argentina. If you sell a player and people don’t agree, they know where you live and what school your children go to“said Simon Kuper, author of “Soccernomics”.

Risk acceptance

Others may lose interest in the dire state of Argentina’s economy. Triple-digit inflation, multiple exchange rates, a shortage of foreign currency and a recent history of several periods of controls on capital movements do not inspire confidence that foreigners will be able to pass on their profits.

As Argentina regularly switches between populist and pragmatist governments, measures put in place by one government are generally reversed as soon as the next comes in. In an environment with such changing rules of the game, private investors may conclude that it is too risky to put their money in Argentine clubs.

This issue has consequences beyond football. The president plans to deregulate and open other (larger) sectors to private investment. It is tempting but wrong to assume that money will start flowing if the laws are changed. Investors must be convinced that the risk is worth the potential rewards.

They want to be sure that public policy will be less erratic. Those conditions do not exist at this time. The risk for Milei is that, even if it survives some exhausting confrontations with Congress and the courts and gets its reforms approved, investors will ultimately not decide to invest.