BTG Pactual: Domestic Companies in Brazil Face Profit Squeeze in 2025

The Brazilian economy faces headwinds in 2025, significantly impacting the performance of companies listed on the stock exchange.

BTG Pactual, the largest investment bank in Latin América, warns that firms focused on the domestic market will encounter the greatest challenges. Domestic companies expect profit growth of only 8% in 2025, a sharp decline from the 29% observed in the previous year.

In contrast, exporters (excluding Vale and Petrobras) project a 44% increase in profits, reversing the 33% drop recorded in 2024. The high interest rate poses an additional risk for companies targeting the domestic market.

BTG Pactual highlights that 48% of these companies’ total debt is tied to the Selic rate, compared to only 18% for commodity producers.

Some specific sectors will face more intense pressures in 2025:

• Food, electronics, and appliance retailers
• Construction companies focused on the high-income segment
• Vehicle rental companies

Santander predicts a challenging macroeconomic scenario, characterized by higher inflation, elevated interest rates, and lower GDP growth.

This conservative view is reflected in investment strategies adopted by asset managers like Ibiuna Investimentos, which prioritizes companies with low leverage, margin protection capability, and export profile.

Despite the approval of the fiscal package, the market assesses that spending cuts will be insufficient to contain public debt. The debt-to-GDP ratio is projected to reach 84% in 2026, an increase of 12 percentage points in four years.

BTG Pactual questions the thesis that the Brazilian stock market is cheap. Considering the current scenario, the bank calculates that the Ibovespa could fall to 90,000 points, 25% below the current level.

An optimistic scenario, although unlikely at the moment, could lead the index to 179,000 points. Caution prevails at the start of 2025, with investors attentive to economic challenges.

They focus particularly on the performance prospects of Brazilian companies, especially those more exposed to the domestic market.

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