(And by football, I mean soccer. Bare with me.)
I am sure that not everyone will be as excited as me, but it is always nice to see something that relates to economics in news relating to your favorite sport. And, it does not hurt when the news has to do with central banking and government intervention.
Marca, a Madrid-based sports newspaper, published a story (in Spanish) on Neymar, a Brazilian football player who had been tied to Real Madrid (a Spanish club, and at times the wealthiest football club in the world) for quite some time. The piece goes into quite a bit of detail concerning why exactly Neymar never trasferred, and why Real Madrid has lost interest in signing this prodigy (considered by some to be the future Pelé). In Spain, this is a big deal, since it was long expected that Neymar would transfer as soon as January 2012 to the Spanish club — Marca nicknames the entire ordeal the “Neymar soap opera”.
It turns out that the major incentive to move to Real Madrid would have been the much higher wages the Spanish club were offering Neymar. Because Santos, the relatively poorer football club that Neymar currently plays for, could not afford to match these wages, his transfer was seen as a real possibility. The threat of his movement to Spain is not just Santos’ problem, apparently. It is also a Brazialian social issue — or, one would think, given how the Brazilian government has responded. Neymar is a celebrity and an icon. He represents the future of Brazil, including the future of Brazil’s national football team at the 2014 World Cup (which will be hosted in Brazil). Thus, the maintenance of his Brazilian identity has been deemed a priority.
It is such a priority that Dilma Rousseff, current president of Brazil, personally intervened in the transfer by securing Santos a €40 million loan from the Bank of Brazil. This loan will help the Brazilian football club raise Neymar’s wages to €7.2 million per year. In terms of gross income, this is still 15% lower than Real Madrid’s offer. But, considering differences in the tax codes, it allows Santos to offer Neymar a roughly equal wage in terms of net income earned.
To me, this is incredible. The president of Brazil decided to guarantee a €40 million loan to a football team, rather than allowing a major international football club pay Santos millions of euros (not just Neymar’s wages, but also the millions which would have been paid to Santos directly to buy out Neymar’s contract), just to maintain a single player. The irony is that this decision will most likely handicap Neymar’s growth as a player, since it will keep him in an inferior and relatively less competitive football team, meaning that when the time comes to represent Brazil at the World Cup he will most likely be less talented than he could have been had he transferred to Real Madrid. But, this is humorous irony.
The worst of it is that Brazil is a country that suffers from serious poverty. It is saddening that a government is more interested in wasting its time extending loans to poor football clubs to maintain what is basically a piece of propaganda (because that is what it is using Neymar as) than actually pursuing policies that could raise the standard of living (and by policies I mean, of course, steps towards reducing the burden of government on Brazilian industry).