Brazilian Companies Face Debt Crisis Amid Rising Interest Rates

Brazilian companies are grappling with mounting financial pressure as interest rates surge, threatening their ability to manage debt and maintain operations.

A study conducted by Íntegra analyzed 153 operational, non-financial firms across ten sectors and revealed that their financial leverage rose to 2.4 times net debt-to-EBITDA by the end of 2024.

This marks the first increase since 2021, when the ratio peaked at 3.3 times, reversing a three-year trend of deleveraging. The Brazilian Central Bank’s Selic rate, projected to reach 15% in 2025, has driven borrowing costs to unsustainable levels for many businesses.

The average loan rate for companies now stands at approximately 22% annually, significantly straining cash flows. Sectors such as transportation, commercial real estate, agribusiness, healthcare, aviation, retail, and construction are particularly vulnerable due to their reliance on credit or sensitivity to economic slowdowns.

Approximately 21% of the companies studied had leverage ratios exceeding 3.5 times EBITDA by the end of 2024, surpassing the healthy threshold of three times. This heightened debt burden has led to a surge in judicial recovery filings.

Brazil’s Corporate Strain

Brazil recorded 2,273 bankruptcy protection requests in 2024, the highest number since records began in 2005 and a 62% increase compared to 2023. Experts anticipate this figure could rise further in 2025 as more firms struggle with debt repayment.

High-profile cases like FMU Group and Cervejaria Petrópolis illustrate that even large corporations are not immune to these pressures. Smaller firms face greater challenges due to limited access to capital markets and reliance on bank loans.

Companies are increasingly exploring restructuring options such as debt renegotiation and asset sales to alleviate financial strain. Gol Airlines implemented a plan in early 2024 that reduced $1.7 billion of debt through equity conversion.

The updated Brazilian Bankruptcy Law (2020) has facilitated smoother recovery processes by extending payment timelines and enabling debt-to-equity swaps.

Banks have also improved their restructuring capabilities, providing more support for struggling businesses. Despite these measures, persistently high interest rates continue to tighten credit conditions and curb growth initiatives across industries.

Brazil’s corporate sector faces an uphill battle as economic challenges mount. While proactive restructuring offers some relief, many businesses remain at risk of insolvency in this volatile financial landscape.

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