Brazil

The Brazilian government is closely monitoring the credit market to ensure liquidity and considering measures for specific sectors, Treasury Secretary Rogerio Ceron said on Monday, Reuters reported. His comments come amid concerns of the new leftist administration of President Luiz Inacio Lula da Silva regarding the impact of high borrowing costs on economic growth, as the country's benchmark interest rate remains at a six-year high of 13.75% to combat inflation. "The government is carefully monitoring the credit market to ensure liquidity and access," Ceron told a news conference.

Brazilian retailer Americanas SA on Thursday failed to reach a deal on proposal to creditors that included a multi-billion-real capital injection by key shareholders as part of its bankruptcy process, Reuters reported.

Brazil's economic activity increased by 2.9% in 2022, according to a central bank index released on Thursday, boosted by the services sector and defying earlier predictions of mild growth, but with recent months' performance showing loss of momentum, Reuters reported. After starting the previous year with a forecast of a 0.3% expansion for the Brazilian economy in 2022, private economists surveyed weekly by the central bank now project 3% growth, on the back of resilient services activity and a stronger labor market.

Investors are losing faith in Brazil’s corporate borrowers in the aftermath of Americanas SA’s implosion, defying reassurances that the century-old retailer’s collapse was a one-off with no broader implications, Bloomberg News reported. Instead, in just the few weeks since the default, power company Light SA, clothing retailer Marisa Lojas SA and travel-agency CVC Brasil have all hired advisers to restructure their debt.

Brazil’s largest publicly-traded banks have set aside 9.3 billion reais ($1.8 billion) for potential losses tied to the collapse of retailer Americanas SA, which is adding to an increasingly complicated credit environment in the South American nation, Bloomberg News reported. While banks didn’t specifically name the retailer as the company responsible for higher provisions in their earnings statements, the impact of the firm’s sudden downfall after uncovering 20 billion reais in accounting “inconsistencies” last month is clear to see in fourth-quarter results.

Brazilian hedge fund manager SPX Capital is among asset management firms taking the lead in a group of local bondholders of troubled retailer Americanas SA organizing for restructuring negotiations, Bloomberg News reported. SPX, XP Asset Management, Riza, Icatu Vanguarda, Prada, Moneda and Exes were appointed as members of the committee that will represent a group of holders of the firm’s domestic debt, according to a document reviewed by Bloomberg. The group also approved hiring law firm E.Munhoz Advogados as its legal adviser, according to minutes from a Feb. 6 meeting.

Brazil’s economic team is considering an early review of the country’s inflation targets in an attempt to defuse tensions between the central bank and President Luiz Inacio Lula da Silva, who has been publicly pushing for higher goals and lower interest rates, Bloomberg News reported. Local assets tumbled on the report, with the real leading losses among emerging markets, as investors didn’t count on the possibility of an imminent change to inflation targets.

A $4 billion accounting shortfall would typically raise alarm bells for an auditor. Somehow, a PricewaterhouseCoopers LLP affiliate didn’t catch it at Americanas SA, Bloomberg News reported. Investor and consumer groups are calling for closer scrutiny of the accounting firm after the unveiling of balance-sheet irregularities that led 93-year-old Brazilian retailer Americanas to seek protection from creditors last month. The gap came in part from supplier financing that wasn’t reflected the right way in the company’s financial statements, which have been audited by PwC since 2019.

Brazil's central bank has expressed concern at increased inflation expectations, saying that a fiscal framework revision and government stimulus package may lead to upward pressure on consumer prices, Reuters reported. In the minutes of its Jan.31 - Feb.1 meeting, when the rate-setting committee kept the benchmark rate at 13.75%, some committee members noted that the fiscal package presented by the Finance Ministry should mitigate the fiscal risks. Nonetheless, "it will be important to monitor the challenges for its implementation," the minutes added.

Top Brazilian banks that are creditors of distressed retailer Americanas SA plan to go after personal assets of billionaires who are the firm’s biggest shareholders: Jorge Paulo Lemann, Marcel Telles and Carlos Sicupira, Bloomberg News reported. The firms will make the move if the billionaires don’t rescue the company with combined capital injections of at least 15 billion reais ($3 billion). The billionaires have offered no more than 6 billion reais.