Brazil introduces plan to renegotiate club debts, force fiscal responsibility

RIO DE JANEIRO -- Brazil's government wants to let football clubs renegotiate $1.2 billion in debts but in the process force them to start spending more wisely.

The measure signed by President Dilma Rousseff on Thursday gives Brazilian clubs up to 20 years to pay what they owe to the federal government. In exchange, they must manage their finances more professionally.

Congress still has to approve the measure.

In order to take advantage of the government's favorable conditions, clubs have to commit to paying players' salaries on time, investing in youth and women, and making their accounts more transparent, among other stipulations.

A majority of the country's top clubs have been enduring serious financial difficulties, but many have opted to avoid paying taxes instead of reducing their investments in football. In addition to having to comply with their tax obligations, clubs won't be allowed to spend more than 70 percent of their total earnings in professional football.

Rousseff said the measure helps "modernize Brazilian football" and was "urgently needed."

"By modernizing how clubs are managed, we will keep them from enduring the same difficulties in the future," Rousseff said in Brasilia. "We are creating conditions and obligations to make sure that their recovery is sustainable."

It is the first time the Brazilian government has intervened to keep the clubs' accounts under greater control. Rousseff recently vetoed a bill that would have allowed clubs to refinance their debt, but did not demand increased financial responsibility.

"This measure will mark a turning point for Brazilian football," said former Brazil goalkeeper Dida, who heads a players' movement trying to improve Brazilian football called "Bom Senso" (Good Sense). He participated in the ceremony in which Rousseff signed the measure.

Clubs that don't abide by the government's demands run the risk of being docked points and being relegated to lower divisions within their championships. Directors who poorly manage the clubs will also be held accountable.

The Brazilian football confederation (CBF) this month said teams in the first, second and third divisions of the Brazilian league will be stripped of points if they don't pay players' salaries on time.

Traditional clubs such as Santos and Botafogo recently faced lawsuits from players demanding delayed payments of wages. Other top clubs that struggled to keep up with high salaries included Gremio, Fluminense and Corinthians. Six-time champion Sao Paulo admitted this year it delayed the payment of image rights it owed to an athlete.

In an attempt to reduce its debt, Palmeiras recently became the first local club to install a salary cap and a production-based contract for players.