Brazil bankruptcy protection filings soar

Bnamericas Published: Friday, June 05, 2020
Brazil bankruptcy protection filings soar

Latest numbers suggest that Brazilian SMEs face a disastrous scenario in the coronavirus-related crisis, so the government is refining its response.

In May, bankruptcy protection requests increased 68.6% month-on-month, reversing a positive pre-pandemic trend, according to credit bureau Boa Vista. 

Compared to May 2019, bankruptcy protection requests fell 40.3%, as the economy, albeit slowly, had been growing. 

“According to the results accumulated in 12 months, there is still a continued downward trend in bankruptcy protection filings. However, this movement was linked to the improvement in economic conditions between 2017 and the beginning of this year,” Boa Vista said.

“Now, with the economic impacts caused by the arrival of the novel coronavirus, and as already noted in the monthly analysis, the trend is that companies will find it more difficult to continue this movement in the coming months.”

To stop contagion, states imposed tight restrictions on movement and business shutdowns from mid-March. And although these restrictions are being gradually lifted, the economic damage persists.

Economists project a 6% contraction this year, leading to the worst recession on record.

“If we see [such a] recession, we can expect more than 3,000 companies filing for bankruptcy protection only this year,” Salvatore Milanese, a specialist in corporate debt restructuring at Pantalica Partners, told BNamericas. 


To compensate for falling revenues, the government is providing special business loans, mainly through development bank BNDES. Yet, many SMEs face high bureaucracy to tap the credit.

"The government must look at this situation seriously and urgently, as small companies are responsible for 80% of the jobs in the country," Milanese said.

Following mining giant Vale, which is anticipating payments for smaller suppliers to support their cash flow, BNDES is planning a credit line for major companies so they can keep paying smaller ones in their supply chains.

BNDES also extended the deadline for loan payments of nearly 27,000 companies.

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