We’re covering today the difficult scenario for small and medium-sized companies. The government’s decision to suspend employment data. And the possible use of national security forces to avoid unrest in Brazil.
How long can Brazilian companies wait for normalcy?
A study among 245 publicly-listed Brazilian companies showed that half of them could last for three months without revenue — while the other half could survive longer. With the cash saved and on hand, plus their accounts and financial investments, they would be able to pay suppliers, their payroll, and other operational costs.
- But for small and medium-sized businesses, the outlook is grim. Most of them can withstand a downturn of business for about 27 days, on average. Besides having less of a cushion, these companies have less favorable conditions to obtain credit.
Red flags. It’s not as if things were rosy before the coronavirus. Default rates among Brazilian companies have been rising for 11 straight months. In January, 6.2 million companies were behind on their dues, 94 percent of them were small or medium-sized. And there’s an additional problem: a third of their debts are not to banks, but to other companies — which creates a ripple effect on the economy.
Why...