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Volume 6 No. 192


When Brazil was awarded the right to host the 2014 World Cup, the country's then Sports Minister "promised that not a penny of taxpayers' money would be spent on building and refurbishing stadiums," according to Andrew Downie of AL JAZEERA. However, with only half of the venues ready, "spending on their construction stand at around" 7.6B reais ($3.2B), roughly three times the original estimate. The vast majority of that cash "has come from public coffers." Brazil "is expected to eventually spend close to" $12B to host the world's premier sporting event. Rio-based U.S. professor of architecture and urban planning Christopher Gaffney said, "It's a big farce. The only people benefitting from this are the big construction companies." One result has been an outlay of $215M to build a 44,000-seat stadium in Manaus, a city whose biggest local football team "has average gates of less than 1,000 people." And Manaus "is not the only such case." The federal government’s own audits court found that "at least four of the 12 arenas are likely to be white elephants once the tournament is over." The government claims the stadiums "will drive development in the surrounding communites." Sports marketing consultant Amir Somoggi, who works with some of Brazil's biggest clubs, said, "This public financing of Pharaonic works is not at all financially viable. We made a big mistake and our money is being thrown away." The situation with the legacy infrastructure "is even more troubling." With 40 million people having been lifted out of poverty since the turn of the century, the country "needs more airports, ports, highways, and public transport networks to cope with that massive growth spurt" (AL JAZEERA, 8/24).

The N.Y.-listed fund manager which owns the second-largest stake in F1 "has invested in Circuit of the Americas," the Texas race track which is home to the U.S. Grand Prix, according to Sylt & Reid of the London TELEGRAPH. The move by Waddell & Reed gives F1 closer links to the U.S. where "it is trying to break into the market." Gaining a foothold there "is understood to be an important part of revving up the stalled plans to float F1 on the Singapore stock exchange." Circuit of the Americas "was built bespoke for F1." The 3.4-mile track in Austin, the capital of Texas, cost a reported $300M to build. The circuit "was part-funded with a $90M loan which was taken out in February last year by its parent company Circuit of the Americas LLC." According to recently-filed documents, Waddell & Reed provided $11.8M of the debt which "is due for repayment between 2017 and 2018." Last year Waddell & Reed paid $1.6B for a 20.9% stake "in F1's parent company Delta Topco." The transaction with Circuit of the Americas brings Waddell & Reed's F1-related investments to 7.6% of its net assets. It "is a higher amount than that for any of its other investments" except for gold bullion which accounts for 9% of Waddell & Reed's net assets (TELEGRAPH, 8/25).

La Liga side Málaga has "come to symbolise the excesses of Spanish club football like few others," according to Tobias Buck of the FINANCIAL TIMES. At one point last season, "the cash-strapped club was unable to pay players' salaries." UEFA found Málaga's finances were in such disarray that it "banned the club from European competitions this year." The club's "fall from grace is mirrored in football grounds up and down the country." Spain's economic crisis has taken a heavy toll on La Liga "as it struggles to emerge from a debt-fuelled boom-and-bust cycle that gripped Spanish football just like it gripped the country." Weighed down by debts that stand at almost €4B ($5.3B) for the clubs in the first and second league, "teams have been forced to sell players, mothball plans for new arenas and slash spending." Eighteen top teams "have gone into administration over the past four years." Spanish Football League (LFP) President Javier Tebas, "likens recent events to Spain's notorious housing boom." Tebas said, "The sector became inflated. It grew through debts. Then the crisis brought an end to all this money -- and strangled us economically." Spanish Superior Sports Council (CSD) President Miguel Cardenal said the league is undergoing both "shock therapy" and a "drastic change in culture." He agrees that the sharp spending cuts enforced on weaker teams will cement the towering dominance of Real Madrid and Barcelona, "but sees no option." Cardenal: "Three years from now, when their debt is reduced, they will be able to compete again. But now they have to take their medicine and it is bitter medicine," (FT, 8/23).