Currently it sounds like common sense to point out Brazil as THE place to do new business in sports – mainly stimulated by the 2014 football World Cup and the 2016 Olympic Games. This presentation not only shows figures that confirm such perception, but also points out the challenges of the Brazilian marketplace and how to deal with those.

2. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Overall Picture Brazil is the largest country in South America. It is the world's fifth largest country , both by geographical area and by population with over 190 million people . It is the largest Portuguese-speaking country in the world and the only one in the Americas. Bounded by the Atlantic Ocean on the east, Brazil has a coastline of over 7,490 km (4,655 mi). It has borders with all other South American countries except Ecuador and Chile. Area 8,514,877 km 2 (5th) Population 190,732,694 (2010 census) Language Portuguese

3. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Economy The Brazilian economy is the world's seventh largest economy by nominal GDP and purchasing power parity (PPP). Brazil is one of the world's fastest growing major economies. It is expected to be the 5 th largest economy before 2020. 2010 List of largest economies source: International Monetary Fund Rank Country GDP (billions of USD) — EU 16,282 1 USA 14,657 2 China 5878 3 Japan 5,458 4 Germany 3,315 5 France 2,582 6 UK 2,247 7 Brazil 2,090 8 Italy 2,055 9 Canada 1,574 10 India 1,537 11 Russia 1,465 12 Spain 1,409 13 Australia 1,235 14 Mexico 1,039 15 S. Korea 1,007

4. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Economy (cont.) Largest economies, 2010 Brazil GDP (nominal), 2010: US$ 2,090Bn GDP per capita, 2010: US$ 10,816 Source: IMF, estimate 2011 projected growth: 5.1% source: EDC source: International Monetary Fund

6. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Estimated infrastructure investment in the 12 host cities of the 2014 World Cup source: Ketchum source: Ketchum $ 3.97 Bn $ 3.47 Bn $ 5.14 Bn $ 7.07 Bn $ 11.58 Bn $ 21.6 Bn $ 4.34 Bn $ 3.78 Bn $ 2.91 Bn $ 1.34 Bn $ 2.98 Bn Sector US$ Billion Urban Transport 41.92 Hotels 7.89 Sanitation 7.77 Airports 4.28 Stadia 3.5 Security 2.63 Energy 1.66 Hospitals 0.73 Ports 0.46 Total 70.86

7. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Projected infrastructure investment for the 2016 Olympics (in $ million and %) source: Ketchum Sector US$ million Highways, Railways 4,451 Environmental manage system 1,205 Airports, ports 1,001 Urban Legacy 820 Security 813 Barra Media Village 812 Electricity infrastructure 770 Sports facilities 490 Olympic Village 427 IBC/MPC 203 Accomodation 56 Health 10 Total 11,059

8. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Domestic Football Football (soccer) is by far the dominant sport in Brazil, and even though, in many aspects, the organization of the sport is still far behind the major European countries, the ‘football business’ is one that has been growing at a very fast pace in recent years. The professionalization of clubs, investment (still moderate) in their marketing departments and the growth of the economy and subsequently people’s purchasing power have pushed the domestic Brazilian football business to a level that allows it to be compared with top European countries. On average, revenues have increased in every area (ticketing, licensing, merchandising, club membership, etc), but more importantly in two sources of revenue: Sponsorship and Media Rights.

9. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Domestic Football (cont.) In 2010, the 20 clubs participating in the Brazilian Serie A, a.k.a. Brasileirão, ranked third in the ranking of global shirt sponsorship published by the research company Sport und Markt. The 20 clubs raised EUR 105 million from shirt sponsors – more than clubs playing in the Italian Serie A or in the Spanish league, La Liga. 2010 Shirt Sponsorship Ranking source: Sport und Markt, Jan. 2011 Leagues (country) EUR million Premier League (ENG) 128 Bundesliga (GER) 118 Brasileirão (BRA) 105 Serie A (ITA) 62 Ligue 1 (FRA) 59 La Liga (ESP) 57

10. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Domestic Football (cont.) source: Sport und Markt, Jan. 2011

11. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Domestic Football (cont.) Source: Sport und Markt, Jan. 2011 Brazil also has a club in the top 5 biggest earners from shirt sponsorship. In 2010, SC Corinthians received nearly R$ 50 million. However, it’s important to notice that recently Brazilian clubs have started to negotiate several parts of their jerseys where they feature the sponsors’ logos – such as shoulders, sleeves, shorts, etc – and not only the chest, as happens in some of the top European leagues and in UEFA competitions. The new Barcelona deal with Qatar Foundation (the first in the club’s history), estimated at EUR 30M/year, is set to bring the club to the top of the 2011 list and it could potentially bring the Spanish League to 3 rd place.

12. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Domestic Football (cont.) The top Brazilian clubs are also set to enjoy a major increase in their Media Rights earnings. After tense negotiations that caused the demise of Clube dos 13 (the association of clubs, formerly in charge of negotiating the rights), all major clubs have individually agreed 4-year deals with incumbent rights’ holders TV Globo, which is thought to be paying, in total, over R$ 1 billion per season (about EUR 450M). The current contract between Globo and Clube dos 13 (2009-11) is worth approximately EUR 210M per year. Ranking of domestic TV rights (in millions of Euros per year) Source: Sportcal.com * Estimate Leagues (country), seasons EUR mi./year Serie A (ITA), 2010/11-11/12 860 EPL (ENG), 2010/11-12/13 790 Ligue 1 (FRA), 2008/09-11/12 668 La Liga (ESP), 2009/10-11/12 520 Brasileirão (BRA), 2012-15* 450* Bundesliga (GER), 2009/10-12/13 412 Süperlig (TUR), 2010/11-13/14 344

13. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Domestic Football (cont.) * Estimate Source: Sportcal.com

14. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil The ‘invasion’ of international sports marketing agencies Another fact that illustrates Brazil’s appeal is the number of international agencies that have recently entered or expanded their operations in the country. Some companies already had operations in Brazil, such as certain advertising agencies. Some decided to enter the market on their own whereas others have chosen to partner with either established or promising businesses. The newest entrants in the market are… Chime/ Golden Goal - Chime Communications - the international public relations group - bought 60% of Golden Goal Sports Ventures, in May 2011. GGSV, which was set up six years ago, is involved in both sponsorship consulting and rights selling for soccer teams such as Flamengo and Botafogo. They also represent AC Milan in Brazil and they manage the sales of premium seats at the Joao Havelange Stadium.

15. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil The ‘invasion’ of international sports marketing agencies (cont.) Havas Sports - The opening of the Brazil HS&E office in 2010 took the network’s global expansion to 25 offices in 20 countries. Former adidas executive Eduardo Corch is the General Manager. Current clients include Ambev, Penalty and Hyundai. Dentsu Sports – Dentsu Latin America created its Sport Business and Entertainment division in 2010, headed by Paulo Leal. Dentsu distributes sponsorship rights for the World Cup and Olympics on behalf of FIFA and the IOC, respectively. It also works as an advertising agency for some sponsors of majors events, e.g. Sony. In Brazil, they work with Sony, Toyota, Embraer and others.

16. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil IMX - In late 2010, IMG Worldwide formed a joint venture with EBX Group, of Brazilian millionaire Eike Batista. The company was first meant to be called IMGX, but had its name shortened to IMX. IMX is a 50/50 joint venture to develop a broad range of sports and entertainment businesses in Brazil. The joint venture endeavors to develop sports and entertainment events, help with infrastructure – such as stadium monetization – and develop academies, among other initiatives. Kentaro - The Kentaro Group announced the opening of its first office in South America in August 2009. It is currently set up as a career management business, but it may develop into trading of footballers. They also consult for football clubs. Octagon/ B2S – Octagon acquired B2S in 2010, having incorporated the Brazilian company’s high-profile portfolio, which includes the Brazilian Football Confederation (CBF) and some of its sponsors – e.g. VIVO. The ‘invasion’ of international sports marketing agencies (cont.)

17. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Prime Time Sport - Company of the former FC Barcelona marketing director, Esteve Calzada, its new branch will aim to trade and to exploit the image of Brazilian footballers. Key person: Luiz Rocha. Sport und Markt – The German research company Sport+Markt announced the opening of the new office in Brazil on September 2010. Since then it has incorporated most of the staff from rival TNS Sports and has worked with several top companies in the country. podSport - podSport serves as a consultancy to aid brands seeking to establish a presence in Brazil. The company belongs to the American advertising agency Pereira & O'Dell, which in turn is part of the Grupo ABC. The ‘invasion’ of international sports marketing agencies (cont.)

18. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil 9ine – The company emerged in 2010 from a partnership between WPP (45%), Brazilian soccer star Ronaldo (45%), and entrepreneur Marcus Buaiz to exploit the image of athletes and manage their careers. In less than one year 9ine added to its portfolio the MMA champion Anderson Silva, embarked on a partnership with player agent Wagner Ribeiro (who manages the career of young prospects such as Neymar and Lucas) and signed with several companies, including Ambev, GlaxoSmithKline, Duracell and Extra supermarkets. The ‘invasion’ of international sports marketing agencies (cont.) Soccer star Ronaldo and WPP’s Sir Martin Sorrell

19. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Mergers and new players Enter Entertainment - The Grupo Bandeirantes (of Band TV) announced the creation of Enter-Entertainment Experience, a company specializing in large events in December 2010. Headquartered in Sao Paulo and Rio de Janeiro, Enter was born with international contracts and annual budget of over R$ 100 million. In 2011 will have organized the Sao Paulo Indy 300 in May and the Miss Universe pageant scheduled for September, both in Sao Paulo. GEO Eventos - Joint Venture between Globo TV and its affiliate RBS TV (from Rio Grande do Sul). The company was born with an initial budget of R$ 250 million. The company was founded in 2010. The company’s sports division has already organized high profile events, e.g. a stage of the ASP World Tour and the Billabong Pro Tour (surfing), as well as the Tênis Espetacular event, with Guga Kuerten and Andre Agassi. The company also entered the ticketing business with the aquisition of Outplan.

20. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Mergers and new players (cont.) Sport Strategy - Sport Strategy is a JV, created in August 2010, between BS+B, one of the best known sports marketing agencies, and Investmark, a communications holding company, owner of advertising agencies such as Neogama/BBH and Ínsula. It aims to create long-term strategies for sports and brands, public and private sectors and to create and produce sports content on their behalf. XYZ Live - In April 2011, Grupo ABC – the largest marketing communications group in Brazil – decided to merge several of its companies - each specialized in entertainment, sport, fashion and culture - into one. The international sports division went to be headed by Geraldo Rodrigues Jr., founder of ReUnion, the agency specialized in motor sports. XYZ Live was born with over 100 employees, thousands of collaborators and 30 major projects scheduled to happen in 2011.

21. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil Other Opportunities Although soccer is by far the dominant sport in Brazil, other disciplines also enjoy good popularity in terms of audience and participation . Apart from state and national championships of several Olympic and non-Olympic sports, Brazil also hosts many of the most important international events in the world . On the right side: two calendars of major international sports events. On the next page: the lists of the most practised and most broadcast sports in Brazil. source: Major Sports Events Guide 2011, by Sportcal source: Major Sports Events Guide 2011, by Sportcal Major annual International Sports Events in Brazil sport event location Athletics Rio de Janeiro Marathon Rio de Janeiro Athletics Sao Silvestre Road Race Sao Paulo Motor racing Formula 1: Brazilian Grand Prix Sao Paulo Motor racing Indy car racing: Sao Paulo 300 Sao Paulo Soccer Copa Libertadores Various Tennis ATP World Tour: Brasil Open Costa do Sauipe Volleyball FIVB World League Various Future Major Sports Events in Brazil year sport event location 2011 Handball World Handball Championships (women) Various 2012 Sailing Volvo Ocean Race stopover Itajaí 2013 Soccer FIFA Confederations Cup Various 2014 Soccer FIFA World Cup Various 2016 Olympics Olympic Games Rio de Janeiro

22. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Favourite sports in Brazil Ranking of most practiced sports in Brazil Source: Atlas do Esporte no Brasil (2007) Sport millions of people 1 Soccer 30.4 2 Volleyball 15.3 3 Table Tennis 12 4 Swimming 11 5 Futsal 10.7 6 Capoeira 6 7 Skateboarding 2.7 8 Surfing 2.4 9 Judo 2.2 10 Athletics 2.1

23. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Sport & Business in Brazil - Favourite sports in Brazil Source: Informídia (2009) Distribution of sports coverage on Brazilian TV Total hours of sport on TV (2009) 22,005 % share 1 Football (soccer) 14,600 66.3% 2 Tennis 1,561 7.1% 3 Motor racing 1,120 5.1% 4 Volleyball 897 4.1% 5 Basketball 833 3.8% 6 Martial Arts 493 2.2% 7 Motor cycling 416 1.9% 8 Surfing 326 1.5% 9 Futsal 235 1.1% 10 Athletics 233 1.1% Others 1,298 5.9%

24. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Challenges Although Brazil may be the most ‘Western’ of the BRIC countries, it is rather challenging to establish any business in the country (it is difficult for Brazilian nationals too). Brazil is placed only in 127 th position (out of 183 economies) in the World Bank Ranking that measures the ‘ease of doing business’ in each country (DB 2011 Ranking). The language (Portuguese) – and, more importantly, the inability of the average population, and even some high executives, to speak English or any other foreign language – is only the first barrier faced by foreign companies that wish to establish business in Brazil . The World Bank’s report on ease to do business reveals that Brazil is a complex country for those looking to initiate an activity there. Compared to other BRIC countries (dark blue), Brazil ranks better only than India, while it is behind both Russia and China. Brazil also ranks worse than other important South American economies, such as Argentina and Chile. Ease of Doing Business – Global Rank source: Doing Business 2011, The World Bank

25. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? Opening a limited liability company in Brazil, for instance, takes on average 120 days, whereas in Chile it takes only 22 days, and in Argentina, 26. The average time needed to open a company in Latin American countries is 57 days, while in OECD countries (Organisation for Economic Cooperation and Development) the average time needed is less than 14 days. In China, one can open a company in 38 days, in average, and in India that would take 29 days. Another aspect where Brazil ranks quite badly in World Bank’s DB Ranking is on ‘paying taxes’, at position 152. According the report, the total time it takes to prepare, file and pay the corporate income tax, value added tax and social security contributions total an astonishing 2,600 hours per year. The average in Latin American and Caribbean countries is 385 hours while in OECD countries the average is of only 200 hours per year. The average amount of taxes on profits (21.4%) is slightly higher than the rest of Latin America, while the amount of taxes and mandatory contributions on labour sum up astonishing 41% of commercial profits. However, despite the bureaucracy, Brazil ranks relatively well when it comes to ‘protecting investors’ (position 74 of 183). Switzerland, for example, is only in 167 th position. Nonetheless, in that category, Brazil still ranks worse than India (44), Mexico (also position 44) and Chile (28), while it is better than China (93) or Argentina (109). Challenges (cont.) source: Doing Business 2011, The World Bank Brazil's Ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 127 Starting a Business 128 Dealing with Construction Permits 112 Registering Property 122 Getting Credit 89 Protecting Investors 74 Paying Taxes 152 Trading Across Borders 114 Enforcing Contracts 98 Closing Business 132

26. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? The ‘Brazilian way’ Many have heard about the ‘Brazilian way’ of doing things, a.k.a. ‘ jeitinho brasileiro ’. Depending on how the term is used, it can have different connotations. The term may invoke creativity, fun, friendliness, improvisation (which could be a good quality, but also implies lack of planning) as well as lack of punctuality, bureaucracy and corruption. Sometimes the term is used to exemplify one of these ‘qualities’ or ‘flaws’. Sometimes it refers to a combination of them. In general, Brazil is perceived as a country where ‘who you know’ is far more important than ‘what you know’. However, it is clear that the best is to have both: knowledge and network ! Walt Disney’s character Zé Carioca symbolizes the ‘jeitinho brasileiro’.

29. July 2011 SPORT IN BRAZIL: Why is that good BUSINESS? ARANTES FRIGERIO PAULO Consulting AFPC is headed by Joao Frigerio, a Brazilian/Italian national with over 7 years’ experience in the International Sports Industry. Before starting his consulting role, he’s been the General Manager of Sportcal Europe for four years. Previously he was the senior editor for Fifaworldcup.com in Portuguese before and during the 2006 FIFA World Cup in Germany. Joao graduated as a journalist in 1999. He also has a Master degree in Management, Law and Humanities of Sports and a MBA in Investor Relations. He is the co-author of '' Mobile Sports Rights in Europe 2006 '' and '' Sport on Broadband 2007: Video Rights, the Internet and IPTV ''. He speaks Portuguese, English, Italian, French and Spanish. For more info about AFPC services, please contact Joao at [email_address] or visit www.frigerio.com.br THANK YOU!

30. July 2011 Joao Frigerio Email: [email_address] Web: www.frigerio.com.br SPORT IN BRAZIL: Why is that good BUSINESS?