Read this Friday’s edition of the FolhaMercado newsletter (17) – 11/17/2023 – Market

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Americans take skeletons out of the closet

After postponing the presentation of its results four times, Americanas released its 2022 balance sheet this Thursday.

The balance of skeletons that have now been removed from the closet is a loss of R$ 12.9 billion in the period, more than double the previous year –R$6.2 billiona result that was also reviewed by the company.

In numbers: the company’s operations burned R$6.1 billion in cash in 2022. The result is indicated by Ebitda (earnings before interest, taxes, depreciation and amortization), which measures cash flow.

The Americanas crisis broke out at the beginning of this year, when Sergio Rial, who had just taken over as CEO of the company, resigned from his position saying he had found “accounting inconsistencies” worth around R$20 billion.

• Since then, the retailer has entered into judicial recovery, with declared debts of R$42.5 billion, and accuses the former management, headed by Miguel Gutierrez, of having committed fraud in the company.

• The executive who spent 20 years in charge of the company denies participating in fraud and claims that the company wants to protect its reference shareholders and members of the board of directors.

The retailer’s next steps:

↳ In judicial recovery:

• The creditor banks, which hold most of the company’s debt, were waiting for the release of the balance sheet to move forward with the agreement on the judicial recovery plan.

• With these figures and the advance purchase of other debts with a discount of at least 70%, the company wants to “clean up” its negative equity of R$26.7 billion.

↳ In everyday life:

• Americanas wants to start generating cash, that is, recording a positive Ebitda, from 2025. To achieve this, it will focus on what attracts consumers to its physical stores, such as sweets, cleaning products and toys.

• Items with higher added value, such as white goods, notebooks and smartphones, will be sold on its website through third-party sellers (“sellers”), an operation in which the retailer receives a commission.

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Government says it will maintain the target as it is

The Lula (PT) government said this Thursday that it will maintain the fiscal target at zero for next year, as Minister Fernando Haddad (Finance) had stipulated.

The statement by Minister Alexandre Padilha (Institutional Relations) confirming that the objective will not be changed comes amid skepticism from the market and the president himself.

Lula said a few weeks ago that the target didn’t need to be zero, which brought down the Stock Exchange and made the dollar soar.

The division in government

↳ The economic team decided to leave the zero target to keep Congress engaged in the government’s fundraising agendas that are being processed there. The Budget provides R$ 168.5 billion in extra revenue to reach zero deficit.

The political teamheaded by minister Rui Costa (Casa Civil), was the one who defended a deficit of up to 0.5% of GDP for next year, so that there would be funds for programs considered priorities for the government, such as the works of the New PAC.

Understand: The fiscal framework provides for a tolerance margin of 0.25 points, more or less, over the fiscal target stipulated each year.

• If the limit exceeds the negative side, cost containment measures are implemented, such as a ban on public tenders and raises for civil servants.

Yes but… The current definition of a zero target does not rule out a re-discussion on the topic next year.

A wing of the government assesses that in March, when the first revenue and expenditure assessment report for 2024 comes out, the realization that it will be necessary to limit expenses will force a new debate to relax the fiscal target.

The Executive is also discussing a legal maneuver to limit the contingency in 2024.

Opinion: It will take time to repair the damage done by the idea of ​​canceling the zero deficit, but the decision is good news, writes Vinicius Torres Freire.

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To read

From the iconic Dutch tulips of the 17th century to the contemporary Americanas scandal, the book unravels the process of formation of speculative bubbles, passing through the euphoria generated in the markets and up to the losses left behind by their burst.

One of its authors, Teixeira da Costa was the first president of the CVM (Securities Commission), an entity that is the sheriff of the capital market.

The body was created precisely after an iconic crisis in the Brazilian financial market, the “boom of 1971”.

• It was generated at the time by measures to encourage the military dictatorship of the capital market, generating a strong speculative wave from the end of 1970 to the middle of 1971.

• This scenario generated a flood of IPOs (initial share offerings) of companies that were barely standing financially, something that alerted more experienced investors.

• They then started taking profits, and the newcomers, who were late to the bandwagon, saw their money turn to dust.

The author’s historical reconstruction of the crises, with comments and behind-the-scenes, gives new life to even known facts, writes reporter Alexa Salomão about the book.