The compass for the credit hangover – 02/04/2023 – Marcos de Vasconcellos

Judicial recoveries, always on the prowl, have once again flooded the news in recent weeks. The iceberg of interest rates and inflation, which suffocate businessmen’s credit and consumers’ purchasing power, tore the hulls of more vessels than the ocean liners Americanas, Oi, Grupo Petrópolis and Amaro.

The doors closed by the pandemic and bank credit crisis first brought down the small ones, who did not have the cash flow to survive. Now, the ice hits even those who were prepared to face the hangover, but not for so long.

The most recent survey by Serasa Experian points out that in 2023 we broke a record for recovery requests for the months of February in five years. Since 2018 we haven’t had so many companies asking for help not to sink in this period of the year.

Compared to 2022, February saw an 87% increase in the number of recovery requests. There were 103, against 55. In the last 12 months, we have an increase of 3.7%, which may seem little, but we came from a sequence of 31 months of decline.

31 months ago, look, this was June 2020, in what we would still classify as the beginning of the Covid-19 pandemic. Startups were surfing in a window of opportunity, entering the Stock Exchange, burning money to grow —the so-called “cashburn”—and with the Selic rate at 2.25% per year.

It is no longer a local issue. The credit crisis became global with the bankruptcy of banks in the United States and Europe.

Here, we don’t run the risk of seeing a banking crisis, former finance minister Maílson da Nóbrega assured me. Our risk control rules prevent this type of movement.

The tide is choppy, but far from preventing navigation in the investment ocean. You have the right instruments at hand, it’s time to use them to follow your course without major scares.

The imminence of a credit crisis requires a different vision for your investments. Some fixed income assets, such as CDBs and LCAs, often considered low risk, now need to have their issuers analyzed more carefully than ever.

It has become essential to take advantage of the end of the 2022 earnings release season to look at the debt and cash structure of the companies you buy or intend to buy shares in.

The best advice ever, diversifying your investment basket, makes even more sense. Focus on low correlation assets, that is, that depend on completely different factors to rise or fall.

Even gold, a safe haven during financial crises, has become more attractive. The metal is considered a store of value and has historically maintained its value during periods of greater economic instability.

Treasury bonds are also good options. The IMA-Geral, which is a kind of Ibovespa for public bonds —a theoretical portfolio of public bonds similar to the one that makes up the Brazilian domestic public debt—, rose 10% in the last 12 months. The Ibovespa fell 15% in the same period.

Do not try to guess the movement of sharks. This is not the time to take risks.

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