Record Number of Companies in Brazil Seek Bankruptcy Protection

The economic recession, increasing costs of credit and appreciation of the U.S. dollar in 2015 levied financial burdens on companies.

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The number of companies in Brazil seeking judicial recovery in 2015 was the largest in the past ten years, according to data released by Serasa Experian, a credit and business research company. In all 1,287 companies that sought bankruptcy protection through a judicial recovery plan, 55.4 percent more than that registered in 2014.

Brazil, Not even sales campaign helped retailers in 2015,

Not even sales campaign helped retailers in 2015, photo courtesy of Agencia Brasil.

“The deterioration of the economic recession, the increasing costs of credit and the appreciation of the U.S. dollar during the year levied financial burdens on companies, either through the decrease of cash flow generation (due to recession) or the increase of costs (due to increase of interest rates and foreign exchange rate,” said the company in a press release.

According to the research firm the services sector registered the most requests for bankruptcy protection last year, totaling 480, while retailers sought 404 and industry 359.

For 2016, however, Serasa Experian economists forecast a more difficult year for retailers. “High interest rates, increasing unemployment and high unemployment, which affected retail negative last year, will remain present in a good part of 2016,” said analysts. Data from the first month of the year supports this forecast. Retail sales in January of 2016 fell by 9.6 percent in comparison to the same period last year, the worst decline since April 2002 (in year-over-year comparisons).

In January only the retail segment of fuel and lubricants registered a growth in comparison to January 2015, of 3.8 percent, while automobiles and auto-parts sales retracted by 20.4 percent, clothing and shoes -15.3 percent and electronics -13.1 percent.

During 2015 the number of companies filing for bankruptcy increased by six percent last year in relation to the previous year.

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