Economy

Brazil's Economy Chugs On, But Debt Worries Start To Surface

The Santander Brasil headquarters in São Paulo
The Santander Brasil headquarters in São Paulo
Sérgio Siscaro, Paula Pacheco and Carlos Tromben

RIO DE JANEIRO - Felsberg Abogados' studies of business law in Brazil are not only well-respected, but are often seen as a very real barometer of the health of the country’s economy. And Thomas Felsberg, the company’s founder, has been observing a unsettling trend since July: a steady increase in the number of companies seeking legal advice regarding problems with debt.

Felsberg says that these enterprises are “small, medium-sized, large and very large companies that are having difficulties and want to renegotiate with their creditors.” He says that the industry most affected at the moment are sugar and alcohol refineries, due to drops in the prices of the raw materials.

But already in July, the International Monetary Fund (IMF) released a report entitled Brazil: Analysis of the Stability of the Financial System, which warns of both internal and external risks. The report notes how the accelerated expansion of credit in the last few years has supported internal economic growth, but has also left the entire system vulnerable to a national debt crisis.

How bad is the situation? The consulting firm Serasa Experian has shown that the number of checks returned for insufficient funds has increased by 11.4 percent in the first seven months of this year, compared with last year.

Still, Ricardo Louriero, Serasa Experian’s president in Brazil, is not as worried. “We have had worse problems with debt delinquency in the past. We saw increasing amounts of late debt payments up until July, but in July it turned around,” Louriero said. He also said he does not think Brazil is experiencing a bubble, as some people have suggested.

Rodrigo Zeidan, a professor of economics and finance at the Dom Cabral foundation, has also said there is no reason for alarm, since Brazil’s debt to GDP ratio is relatively low.

On Defense

However, the IMF’s report said that Brazilian families are giving 23% of their incomes to service debt -- a proportion that is high compared to the rest of the region.
According to the report, debt service during an economic downturn can lead to stress for some households, which is already the case in Brazil.

Marcial Portela, president of the Santander bank in Brazil, has also recognized at a conference recently that “late debt payments in the last four trimesters have increased to a level that is not normal.”

The response from many banks has been increasingly strict conditions for repayment and credit requirements from clients. On the other hand, other observers are warning banks that using an iron fist and lawsuits is not a viable solution for turning things around. They recommend that the banks try to find an agreement with clients who are behind on their mortgages. Some banks have, in fact, tried to lower interest rates through refinancing for clients who are in trouble.

In fact, one of the problems are the interest rates in Brazil, which are still among the highest in Latin America, and among developing countries. According to the World Bank, in 2011 the real interest rate in Brazil rose to 34.5%, nearly three times that of Peru, the second-highest in the region.

According to the IMF, the reason for Brazil’s high interest rates is the country’s low savings rate. According to the IMF’s report, if Brazil’s savings rate rose to the levels seen in Mexico, the difference between Brazil’s interest rate and others in the region would likely be cut in half.

But not everyone in Brazil is concerned by the evidence that debt delinquency is increasing. Dorival Dourado, president of the credit agency Boa Vista Servicios, says he is currently holding less delinquent debt this year than last. “The country has full employment and people’s understanding of how to use credit is getting better and better," Dourado said. "The middle class will continue to live in paradise.”

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

Spencer Tunick Nude Installation in Israel

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Salam!*

Welcome to Monday, where the UK pays homage to slain MP David Amess, Myanmar frees thousands of prisoners, and Facebook gets ready to build its "metaverse." Please fasten your seatbelts: Worldcrunch also takes stock of the long-lasting effects — good and bad — the pandemic has had on the air travel industry.

[*Azeri - Azerbaijan]

🌎  7 THINGS TO KNOW RIGHT NOW

Myanmar to free political prisoners: Myanmar's junta chief Min Aung Hlaing has announced the release of 5,636 prisoners who had been jailed for protesting the coup that ousted the civilian government in February 2021.

• Powerful Haiti gang behind the kidnapping of U.S. missionaries: The notorious 400 Mawozo gang is believed to be behind the kidnapping in Haiti of a group of Christian missionaries, including 16 U.S. citizens and one Canadian. The brazen kidnapping on Saturday comes as crime is spiking since the killing of President Jovenel Moise in July.

• UK to pay tribute to David Amess: British lawmakers will pay homage in parliament to colleague David Amess, who was stabbed to death Friday in what was described by the police as a "terrorist incident." Officers arrested a 25-year-old suspect whose father, Harbi Ali Kullane, worked as a media adviser to a former prime minister of Somalia.

• COVID update: Russia has registered more than 34,000 cases of new infections in the past 24 hours, a new record since the start of the pandemic. Meanwhile, police in the northeast Italian city of Trieste used water cannons to clear striking dockworkers protesting Italy's new requirements that all employees be vaccinated.

• At least 26 killed in floods in India: Torrential rain has triggered floods and landslides in India's southern coastal state of Kerala, killing at least 26 people.

• Facebook to hire 10,000 in EU to develop "metaverse": The U.S. social media giant plans to hire 10,000 workers in the European Union over the next five years to build a "metaverse," a virtual reality version of the internet that the company touts as the future.

Punishing parents for children's bad behavior: After limiting gaming hours for minors, China is now considering legislation to reprimand parents if their children exhibit "very bad behavior" or commit crimes.

🗞️  FRONT PAGE

Colombian daily El Espectador dedicates its front page to Alex Saab, "owner of the secrets" of Venezuelan President Nicolas Maduro. The Colombian businessman, wanted by U.S. authorities for allegedly laundering money on behalf of Venezuela's government, has been extradited from Cape Verde to the U.S. where he is scheduled to appear in court today.

#️⃣  BY THE NUMBERS

4.9%

China's economy registered its slowest pace in a year as the country faces a looming energy crisis with power shortages and increasing pressure on its property sector. Gross Domestic Product (GDP) for the period between July-September rose 4.9%, the weakest numbers since the third quarter of 2020 and significantly lower than forecasts. The world's second-largest economy faces a debt crisis linked to the China Evergrande Group debt crisis, while energy shortfalls have dropped factory output to its weakest since early 2020, when heavy COVID-19 curbs were in place.

📰  STORY OF THE DAY

7 ways the pandemic may change the airline industry for good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

⛽ Cleaner aviation fuel: With air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel. In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials

.🛃 Smoother check-in: The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

✈️ The billion-dollar question: Will we fly less? At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel, in particular, is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.


➡️ Read more on Worldcrunch.com

📣 VERBATIM

"The crimes committed that night are unforgivable for the Republic."

— Emmanuel Macron became the first French president to commemorate the killing of as many as 200 Algerian independence protesters by Parisian police in 1961. For 40 years, French officials ignored the massacre, which took place a year before Algeria gained its independence from France after an eight-year war. In 2012, French President François Hollande acknowledged the killings for the first time on a visit to Algeria, and Macron took it further by attending Sunday's commemoration at the site where the events happened in the French capital. Still, many had hoped the French President would go further and take responsibility for a "state massacre," for a crime many historians consider the most violent repression of a peaceful demonstration in post-War Europe.

📈💥  IN OTHER NEWS

​Low trust, high risk: The global rise of violence targeting politicians

The deadly stabbing of British Parliament Member David Amess confirms an ongoing study on trust and governance in democracies around the world: It's bad. In The Conversation, James Weinberg — the study's author and a lecturer in Political Behavior at the University of Sheffield — writes:

⏪ The assassination of Amess, who was stabbed to death in his constituency on Friday, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councilor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

☝️ Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

🇬🇧🇳🇿🇿🇦 Not only are these experiences of abuse or threats of physical violence felt across both sides of the political aisle in the UK — they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile, from New Zealand to South Africa.


Read the full piece from The Conversation, now on Worldcrunch.com

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ