Brazil breaks report with 6.3 million firms in default, 30% of the whole

The number of defaulting companies hit a record in September this year, according to a survey by Serasa Experian obtained exclusively by the UOL. There are 6.3 million companies with overdue debts, the highest number since the beginning of the historical series in March 2016. The data include small companies.

Today Brazil has 20.4 million companies, according to the federal government’s Business Map. This means that about 30% of companies in the country were in default by September of this year.

What was the previous record? In January of this year, the number of defaulting companies reached 6 million. The last record of defaulting companies was recorded in June this year, with 6.2 million defaulting companies. The data remained stable during June, July and August.

What is the total debt? Total overdue debt is R$105.2 billion. The Serasa Experian survey considers a company that has at least one overdue and unpaid account to be in default.

What is the average debt of each company? The research shows that companies owe, on average, R$ 16,771.80 to creditors. Each company owes, on average, to 7.1 creditors.

What are the most indebted sectors? The service sector leads the ranking, representing 53.3% of negative business. Then come trade (37.7%), industry (7.8%), primary sector (0.8%), which is responsible for the production of raw materials, and others (0.4%).

Micro and small companies are most affected: The indicator shows that of the 6.3 million companies in default, 5.6 million are micro and small companies, an increase of 5% compared to September last year.

What is the average debt of each company? The research shows that companies owe, on average, R$ 16,771.80. Each company owes, on average, to 7.1 creditors.

The vice president of small and medium-sized companies at Serasa Experian, Cleber Genero, says smaller companies tend to take longer to recover, even in a scenario of stable economy.

Why did defaults set a record? The economist at Serasa Experian, Luiz Rabi, says that the record is a reflection of two main reasons: the increase in default by individuals and the increase in the basic interest rate.

Brazilians are in debt: A survey by the CNDL (National Confederation of Shopkeepers) shows that four out of ten adult Brazilians were negative until September. This number is equivalent to 64.25 million people, a record of the survey, carried out eight years ago.

Each Brazilian owes, on average, R$ 3,688.96, and it takes about 10 months to get out of default.

Rabi says that when the final consumer is in debt, some company stops receiving payments. The default of Brazilians pulls that of companies.

Expensive interest for companies: Rabi says that the increase in the basic interest rate to contain inflation made credit more expensive for companies, especially for small and medium-sized ones.

Companies also use loans to advance customer payments on credit. If the person made a purchase in ten installments, the company makes an advance payment of the total amount with the bank, upon payment of interest. In practice, the company receives less.

To contain inflation, the BC (Central Bank) made a series of hikes in the basic interest rate (Selic), which began in March 2021, when the rate went from 2% per year to 2.75% per year. In August of this year, the rate reached 13.75% per year, the current level.

The Selic serves as a parameter for all interest rates charged by the financial market.

How can a company clear its name?

Serasa’s orientation is that the company seeks to renegotiate its debts. Rabi says creditors are often flexible in renegotiation processes.

Rabi also says that the company needs to analyze its accounts to understand expenses and income, seeking to cut unnecessary expenses to balance the accounts. Another option is to look for cheaper lines of credit, so that the company can pay lower interest rates.

Source: Uol