Stretched to the Breaking Point
A devalued currency, heavy dollar debts and plunging equity prices have taken their toll on Brazilian companies. Some are recovering while others have become acquisition targets for the survivors.
The change in government has coincided with a severe credit
crunch that has squeezed even large and well-connected
companies. Several of them are defaulting on billions of
dollars in debt. Publicly traded non-financial, nonoil
companies in Brazil had debts of R$236.52 billion ($60.72
billion) at the end of September 2002, according to
Economática, a consultancy. About 70% of those debts
were denominated in dollars, so last year's crash in the value
of the real drove up indebtedness and debt service costs 40%,
just about wiping out profits."This is one of the worst years
[for corporate profits] in history," says Fernando Exel,
president of Economática. "These companies made almost
zero profit. It is a disaster." Net income for all listed
companies last year fell by nearly half in local currency terms
to an estimated R$8.68 billion, even though operating income
rose 12% to an estimated R$51.05 billion....
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