Global Glance: June 1, 2015
A quick look at intriguing international stories
By John Bostwick, Managing Editor, Radius
Welcome to Global Glance, my pick of entertaining and informative international business stories from around the web. This week we look at:
- The ongoing FIFA scandal and the Foreign Corrupt Practices Act
- The appeal of soccer clubs to foreign-based investors
- UPS’s expansion into Myanmar
FIFA: Sort of Rhymes with FCPA
“No practice is more global than soccer. . . . The World Cup remains one of the few occasions during which humanity can be an imagined community.” So wrote soccer historian David Goldblatt in a 2011 article for Bloomberg.com. The article described how some members of FIFA’s executive committee had been accused of selling their votes during the bidding process for the 2018 and 2022 World Cups.
You’ve almost certainly heard by now that those accusations have resurfaced. Last week, “Nine FIFA officials and four executives of sports management companies were arrested on suspicion of receiving bribes totalling $100m (£65m), according to the US Department of Justice.” (For some excellent background on the situation, including a brief history of FIFA, check out this article by Ishaan Tharoor in The Washington Post.)
The arrests were made as part of a coordinated effort between US and Swiss authorities. In a press release last Wednesday, US Attorney General Loretta E. Lynch is quoted as saying, “Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”
Another article in The Washington Post on the investigation outlines exactly why “the United States can prosecute non-citizens who work for an organization located in Switzerland and who are accused of taking bribes abroad,” including the relevance of the Foreign Corrupt Practices Act (FCPA), a US anti-bribery law. The article notes that it is not yet clear how the FCPA will affect the case against FIFA members. It is clear, however — both from the FIFA case and other evidence mentioned in the article — that global anti-bribery laws are increasingly common and more regularly enforced than they were just a couple of decades ago. As some FIFA officials can now confirm, multinationals of all sizes will ignore this trend at their peril.
The Appeal of Global Soccer Clubs as Investments
The FIFA bribery scandal is newsworthy because of FIFA’s power, the enormous sums of money involved, and the world’s appetite for the game. Given soccer’s global appeal, it’s not surprising that many investors are looking to cash in, often by investing in foreign-based clubs. To take a personal example: A few years ago I watched a soccer game in Boston between an English team (Liverpool) and an Italian team (A.S. Roma). Both teams have long histories and are important in their respective sporting cultures. And both are now owned by Americans.
The US’s top soccer league — MLS — is modest compared to the English and Italian leagues. But MLS teams also represent an appealing investment opportunity for global businesses. In 2013, the elite English side Manchester City partnered with the New York Yankees to shell out $100 million for the MLS expansion franchise New York City FC, now in its inaugural season.
One of the more unusual, and fascinating, stories of soccer as a global business opportunity involves a Mormon from Utah who was born in Israel and started a financial firm in Costa Rica. A two-part article in The Deseret News describes how Jim Patey purchased the nearly 90-year-old Costa Rican soccer team Club Sport Herediano in 2012, despite the fact that “the club's ledger was bleeding red ink and its business plan was so poor that the club hadn't made payroll in six months.” At the time, Patey was not even a fan of soccer, let alone the team, and he did not make the purchase for any romantic reasons. “This is not a charity,” he said in The Deseret News article. “I wouldn't do this if there wasn't a business plan to go with it.” You can read part two of the article here.
UPS in Myanmar
In 2013, journalist Ben Schreckinger wrote an excellent blog post for Radius on the subject of Myanmar (also known as Burma). It remains an excellent short introduction to the recent history of the country, including its ongoing transition from a closed country run by a totalitarian regime to a more open society. Schreckinger concludes the post with a section on European and U.S. sanctions on Burma, which includes the following observation: “For now, most companies will want to watch and wait on Burma. But watch carefully, and you could be the first to seize a big market opportunity.”
The folks at UPS decided to seize the opportunity. Last week, The Nation reported that the express delivery service is expanding into Myanmar. The article notes that UPS’s move “is expected to convince more US companies of Myanmar's business potential and strengthen the country's reengagement with the world.” UPS is attracted by Myanmar’s SMEs (small- and medium-sized enterprises), which make up 98% of the country’s businesses. UPS spokesman Jeff McLean noted, “UPS started with three people 108 years ago. Now we have more than 400,000 employees. That is why we are willing to support SMEs.” Given UPS’s size and reputation, it’s likely that other companies around the globe will soon be rushing to capitalize on this intriguing market.