Coronavirus-led closure wave begins in Brazil

Four months after coronavirus arrival, Brazil company closures bankruptcy
Photo: Daniel Jedzura/Shutterstock

Back on March 26, The Brazilian Report that, after hospitals, bankruptcy courts would be the next public administration sector to become overburdened. “The prospect of recession and widespread bankruptcy has led Brazil’s Justice system to fear a new problem on the horizon: a huge influx of administration pleas from business owners,” wrote reporter Brenno Grillo. 

This process has begun.

Brazil has started to experience a wave of factory closures. In many cases, companies were already facing dire straits before the coronavirus arrived in Brazil four months ago. Meanwhile, several foreign-owned companies launched restructuring processes planned well before the pandemic. 

The Brazilian economy was in deep trouble before the pandemic, as The Brazilian Report has covered — and the coronavirus crisis has only worsened existing structural problems. Think tank Fundação Getulio Vargas predicts that Brazil’s manufacturing sector will contract by 11.5 percent this year. In Q2 2020, the sector will shrink by 21 percent — the worst results in 40 years. Manufacturing firms have also been shedding jobs at an alarming rate. Vacancies in the sector jumped from 32,000 in March to 196,000 at the end of April.

After consulting with unions, companies, and city halls, journalist Thais Carrança reports that six factories have closed since April: Japanese firm Mitutoyo, auto part manufacturer Kostal, as well as footwear producers Paquetá, Piccadilly, Ramarim, and RR Shoes/Via Uno. This is only the first wave of factory closures, and more can be expected over the coming months.

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