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On a recent trip to South America, I happened to be in Argentina right after their historic win at the 2022 Fifa World Cup in Qatar.
In many ways, Argentina’s win was a celebration for soccer across South America and signalled a larger trend in the growth of soccer in that part of the world. Investors have taken notice, and more people are recognising the financial opportunities for investment in soccer in the market.
From media rights to league ownership and club investment, the interest in soccer across South America has never been greater. Recent examples include Miami-based alternative investment firm 777 Partners backing 1190 Sports’ purchase of the media rights for Peru’s Liga 1, while sovereign wealth funds out of the Middle East are looking at investment in a new league structure in Brazil.
However, the majority of investors are looking at club ownership as the area with the most upside potential across South American soccer.
The opportunity
Soccer is by far the most popular sport in South America, with massive clubs and passionate supporters that rival the biggest sides across Europe. This support provides a significant commercial opportunity for those teams to tap into, generating extraordinary revenue from ticket sales, merchandise and media rights. On my recent trip to Peru, I was able to visit Club Sporting Cristal in Lima and experience the incredible passion and support that club enjoys.
South America is also known for producing top soccer talent. Many of the largest clubs in Europe have successfully scouted and recruited players from South America, generating significant returns on investment for the local clubs that developed them. Most recently, Argentinian giants River Plate received approximately €35 million (US$38 million) when Enzo Fernández was sold from Portuguese side Benfica to Premier League club Chelsea.
The transfer of Enzo Fernandez from Benfica to Chelsea netted his former club River Plate around €35 million
Several investment groups implementing multi-club ownership strategies have already been using South America as a hub to develop young talent before moving those players to partner clubs in Europe. In 2017, City Football Group (CFG) bought and rebranded a team in Uruguay (Montevideo City Torque) and have made significant infrastructure investments in that club, building one of the most advanced academy centres in South America. With a favourable business climate and attractive tax laws, a market like Uruguay can be quite interesting to foreign investors.
Compared to European soccer leagues, the cost of operating a club in South America is relatively low. This is due to lower player salaries and lower operational and administrative expenses, which can result in a more efficient and well run club. Generally speaking, the soccer industry in South America is still relatively underdeveloped compared to Europe, presenting significant growth potential for investors. As the region’s economies grow, more fans will have disposable income to spend on soccer, leading to increased revenue for clubs.
The opportunity also exists for investors to have a first-mover advantage in certain markets that have little to no foreign investment. Major League Soccer (MLS) clubs, for example, have been buying talent from undervalued South American markets such as Colombia, Ecuador and Paraguay. It is only a matter of time before these same ownership groups make the calculation that buying a talent-producing club in one of these markets is more financially efficient than buying individual players.
The challenges
Brazil is seen by many investors as the market with the most potential and opportunity in soccer. In 2021, Brazil passed a new law that allowed soccer clubs to become limited companies, which opened the market to private ownership of clubs. Several multinational investment funds have entered Brazilian soccer in the last year, with more to follow.
However, it may be easier said than done to have success in such a challenging market like Brazil. Many South American countries are known for their volatile economies, with currency fluctuations and inflation rates that can have a significant impact on investment returns. Having personal experience in the wine business in South America, I can speak to our experience with the difficulties navigating the economic climate and currency devaluation over the last ten to 15 years in Argentina.
Uruguay’s Club Atlético Torque were rebranded in 2017 after being acquired by City Football Group
Political instability is also a challenge in many South American countries. Changes in government policies, corruption and social unrest can create uncertainty and negatively impact investment decisions. Plus, many countries in South America lack adequate infrastructure to support soccer, including proper stadiums, training facilities, and transportation networks.
Most recently, civil unrest forced Peru to restart their top division, Liga 1, behind closed doors. This uncertainty can make it difficult to attract top players and fans, which can impact the financial success of a soccer club. Each country has its own legal and regulatory environment, which can make it challenging for foreign investors to navigate. Complex tax laws, labour laws and licensing requirements can add significant complexity and cost to operate a business in that part of the world.
The breakdown
More than any other part of the world, it’s crucial to have savvy and experienced operators involved in any soccer project in South America. Each country on the continent has its own soccer culture, fanbase and business environment, so it’s important prospective investors understand the customs and business practices of the specific country or countries they intend to do business in. There is a large pool of talented soccer players across South America, but building the proper infrastructure to identify, develop and then move that talent abroad is essential.
With all that being said, South America presents a unique and exciting opportunity to invest in soccer in a geographic region that is undervalued and just opening up to the soccer investment world. With a healthy appreciation for the challenges of doing business there, investors will continue to look to South America for the potential in the soccer investment landscape for years to come.
About the author: Jordan Gardner is an American sports executive, investor and operator. His work in European soccer includes experience raising capital to invest, evaluating investment opportunities, successfully investing in multiple clubs, turning around a club’s sporting operations, securing promotion, and ultimately selling a club to new buyers. Gardner is a minority shareholder in Swansea City AFC, former board member of Irish club Dundalk FC, and former managing partner and chairman for Danish Club FC Helsingør.
