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Liquidity risk of 'most' Brazilian sectors lowered by stronger fundamentals

Publication Date: 09 May 2019 - By ReachX Team By ReachX T.

Equity Fundamental Macro Multi Asset Equity Latin America


Brazil's corporate funding risk will ease in 2019-20, with higher free cash flow generation and improving economic fundamentals, according to a leading rating agency. 

In a note to clients, Moody’s said market concerns over Latin America’ largest economy were easing somewhat, however, funding needs remain high for infrastructure and utility companies, with high investment commitments.

"With a deep recession still in recent memory, we expect that most Brazilian companies will remain cautious about liquidity and uses of cash," said Erick Rodrigues, Vice President at Moody’s. "In 2018, cash availability for companies was similar to 2017 levels, and so was cash coverage of short-term debt, but overall refinancing risk has eased slightly based on higher free cash flow projections."

The rating agency expects that market issuance will increase in 2019 as business and market confidence resumes. Rising US interest rates, global trade tensions and Brazil's political uncertainty limited issuances in 2018 until after October's presidential elections. 

“However, market activity picked up since the October 2018 presidential election, with issuances from JBS, CSN, Gol, Petrobras and Atento. Furthermore, Brazilian companies overall have a manageable maturity schedule, with just an average 15% of corporate debt due in the short term as of December 2018,” Rodrigues added.

Virtually all corporate sectors in Brazil improved their exposure to funding risk in 2019 from 2018 levels. Liquidity risk in the homebuilding sector moved to medium risk from high risk, and to low risk from medium risk in the protein sector, while most other sectors maintained their low overall funding risk. 

Additionally, funding risk remained overall high in 2018 for the infrastructure sectors of energy, transportation, and water and waste.


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This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX T.


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