Stretched to the Breaking Point

Stretched to the Breaking Point

M&A

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 z

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