2023-07-09 21:00:29
BarcelonaA work of gigantic dimensions such as the remodeling of the Camp Nou must by nature coexist with the fact that any geopolitical or economic turbulence in the world can affect it. For example, the Russian invasion of Ukraine has led to an increase in the price of materials and a rise in interest rates. In addition, Barça has looked for traveling companions abroad, a decision which means that we have to be even more aware of what is happening on a global scale. The funding for Espai Barça comes from the United States, with investment funds Goldman Sachs and JP Morgan at the helm, and the construction company that is carrying out the works, Limak, is Turkish.
Precisely, Turkey is experiencing a very complicated economic moment with the presidency of Erdogan, who won the general elections again at the end of May. “With one Turkish lira you used to be able to buy 100 grams of rice and now only 50. And this already comes from a devaluation in previous years. As is also happening to Argentina, it is a consequence of the lack of confidence in Turkey . Foreigners don’t invest there,” Xavier Brun, professor at the Barcelona School of Management, explains to ARA. After Erdogan’s re-election, the currency has reached historic lows. One euro is now equivalent to 28 Turkish lira and the devaluation has been 77% in the last five years.
“There has been a flight of capital because people buy euros in order not to lose purchasing power,” continues Brun. The devaluation of the lira has been accompanied by inflation that now exceeds 40%. “To try to solve it, Erdogan lowered interest rates and this is throwing gasoline on the fire.” “All of this is due to the populist politics of Erdogan, who in his way of doing things resembles Putin or Xi Jinping. He does not comply with many aspects of democracy or human rights, but Turkey is a large country with many resources and a privileged geopolitical situation. It is a large emerging country. From the 1990s until now, it has grown and evolved”, analyzes Joan Ribas, economist expert in globalization and professor at the Escola Superior de Comerç Internacional (ESCI) at Pompeu Fabra University.
The conversion of euros to Turkish lira
The economic situation in Turkey will end up affecting the remodeling of the Camp Nou in one way or another, despite the fact that the experts still do not dare to say in what sense. The club will pay Limak in euros. “Thus, when the company converts them into Turkish liras, it will charge much more than it did a while ago. It will have more profit in Turkish liras if the trend is for it to continue to depreciate,” says Brun. “That’s why it would be normal for Barça to ask Limak for a reduction in the marked price,” he adds. At the presentation of Espai Barça’s financing two months ago, the corporate director of the Catalan entity, Maribel Meléndez, explained that the remodeling of the Camp Nou, including interest, would amount to 1,071 million euros. In addition, 200 million would be for contingencies and 179 to pay financial interest. But the president of Barça, Joan Laporta, said a few days ago in an interview with The vanguard that the club’s intention was to “cut the 1.1 billion that was said” and turn it “into 930, if all goes well”. Anyway, the reason he gave for this possible downgrade was not the devaluation of the Turkish lira, but the flexible interest rates that exist in some tranches of the financing operation.
Materials can be expensive
“Yes, the fact that Barça pays Limak in euros can make the company win when it converts them into lire,” a former Espai Barça employee confirms to ARA. “But what you gain on the one hand as a result of the crisis in the Turkish economy, you may lose on the other. Inflation will cause the price of materials, which Limak may intend to buy in large quantities from Turkey to allocating them to various works he has underway, is not as economical as he thought”, he points out. Anyway, this former employee says that “Limak should have no problems transporting the materials by sea to Barcelona because their conglomerate has a ports division”. [L’economista Marc Ciria va explicar a l’ARA que aquesta divisió de Limak ha hagut de finançar-se amb bons de 370 milions considerats porqueria pagant un 8,5% d’interès.] The materials, according to the experts consulted, could also come from China, with whom Turkey maintains good trade relations. In the event that it is confirmed that the materials to carry out the remodeling of the Camp Nou come from outside the European Union, they must obtain the seal of the European Community (CE) and receive the approval of SGS, the Swiss multinational that Barça has hired him to take care of the safety and health of the work.
Brun explains that “a construction has two variables as main prices, cement and steel”. And, due to the devaluation of the Turkish lira, “For Limak, foreign materials have doubled or tripled.” The manufacture of cement entails electricity costs for cement plants and this expert warns that “Turkey has few renewables and electricity is based on gas and oil, which must be paid for in dollars, which leads to an increase in prices for the Turks”. In addition, he points out that “Turkey does not have large steel plants”. But anyway, Brun is optimistic because “Limak’s expenses should not increase to the same level as the depreciation of the lira basically due to the fact that Turkey produces cement.” ARA has asked Limak about the issues discussed in this report and his answer was as follows: “We will not give details of a private and confidential contract between FC Barcelona and Limak”.
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