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Will Troubled South American Economies Cause Problems for Formula 1?

Matthew Walthert@@MatthewWalthertFeatured ColumnistJanuary 15, 2016

Without PDVSA support, Pastor Maldonado may not be on the grid in 2016.
Without PDVSA support, Pastor Maldonado may not be on the grid in 2016.Lars Baron/Getty Images

With South American countries facing, "an economic storm of the likes the region hasn't seen in decades," per Joshua Goodman of the Associated Press, it is reasonable for Formula One fans to ask how the sport's future on the continent might be affected.

Brazil and Argentina, in particular, have longstanding ties to F1, producing four world champions between them that have won 13 titles. The Argentine Grand Prix first appeared on the F1 calendar in 1953 and continued, with some gaps, until 1998. Lately, there has been intermittent talk of reviving it. And the Brazilian Grand Prix has been part of the World Championship every year since 1973.

In 2015, there were three South American drivers on the grid—and at least two of them owed their positions largely to state-funded sponsorships from their home countries.

First, there is Pastor Maldonado, who may already have raced his final grand prix. The only real surprise is that he lasted this long. And not because of all those crashes—at least not specifically—but rather it is surprising that his sponsorship cheques from the Venezuelan state-controlled oil company PDVSA continued to arrive for as long as they did.

Now, with the price of oil plummeting and the Venezuelan economy in turmoil, it seems the well, so to speak, has finally run dry.

According to the BBC's Andrew Benson, the $50 million that PDVSA pays to the team to keep Maldonado in a race seat is several weeks overdue, and Renault is considering bringing in former McLaren man Kevin Magnussen as a replacement.

Pastor Maldonado
Pastor MaldonadoRONALDO SCHEMIDT/Getty Images

"It's speculation at the moment. We have a contract with Pastor. That is the current situation," a team spokesperson told Benson. "Who knows what could happen by Australia but, at the moment, we are going forward with Pastor and Jolyon [Palmer]."

Not exactly a vote of confidence.

Meanwhile, Brazil's economy is also in big trouble. The Economist recently reported that the country, "faces political and economic disaster," as president Dilma Rousseff is fighting impeachment and the economy continues to contract.

At the same time, Brazil's state-owned oil company, Petrobras (incidentally, the Brazilian Grand Prix's title sponsor), is embroiled in a bribery scandal.

There are no hints that Brazil's financial problems are affecting the race in Sao Paolo, but we do know that F1 boss Bernie Ecclestone is not sentimental about traditional races. If the money is gone, so is the sport.

Petrobras is struggling under the largest debt load of any oil company in the world, according to the Wall Street Journal's Rogerio Jelmayer, so it is not hard to foresee a situation where the Brazilian government needs to cut spending and sees the grand prix as expendable. 

Of course, no matter what happens, the prestige of a grand prix might outweigh any realistic concerns about whether the hosting fee is actually delivering a good return on investment.

And then there is Sauber's Felipe Nasr. Sky Sports' James Galloway called it a "surprise" when the Swiss team signed the Brazilian GP2 driver for the 2015 season. Clearly, cash-strapped Sauber was enticed by the Banco do Brasil sponsorship that Nasr brought with him, which a Press Association (h/t the Guardian) report pegged at £10 to £12 million per season.

Felipe Nasr brought sponsorship from Banco do Brasil (and a new colour scheme) with him to Sauber in 2015.
Felipe Nasr brought sponsorship from Banco do Brasil (and a new colour scheme) with him to Sauber in 2015.ANDREJ ISAKOVIC/Getty Images

Now, the state-owned bank is also feeling the affects of South America's economic problems, missing profit estimates in the third quarter of 2015, per Bloomberg's Francisco Marcelino.

Again, there is nothing to suggest Nasr's sponsorship is in any danger, and he performed well for Sauber last season, but the Brazilian government will need to make tough choices in the near future. The country has a rich motorsport heritage, but will that be enough to protect Nasr when cuts need to be made and the knives are drawn?

In Argentina, the news is slightly more promising. A new government is lifting some of the economic controls imposed by its predecessor and, according to Reuters' Maximiliano Rizzi and Hugh Bronstein, cautiously projecting economic growth later this year.

When the new Argentinian government was elected in 2015, F1 journalist Joe Saward reported on his personal blog that incoming president Mauricio Macri, "has plans to revive the Autodromo in Buenos Aires, in an effort to increase the country’s tourist trade."

Saward continued:

The city's ultimate goal is for a return of Formula 1, but it has long been clear that this will only happen if there is backing from the federal government. Macri is reported to have met Bernie Ecclestone some years ago to discuss the possibilities, but Argentina's economic problems have made a race impossible.

If the economy does start to improve, though, could that put a revived Argentinian race back on the table?

As long as Ecclestone and his private equity partners are running F1, the sport will go wherever the money is. That is why there is a "European Grand Prix" in Azerbaijan this year and that is why F1 continues to race in Russia, despite the country's chequered international profile.

Th future of F1 in South America depends on the region's governments deciding to keep the cash flowing. If they don't—or can't—well, we saw what happened to France and is currently happening in Germany.

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