Phillip Krinker

Brazil’s Post-Election Economy: The effect on companies

The pre- and post-election scenarios lead us to ponder about the financial health of companies and how much they can suffer from political/economic uncertainty.

There are several circumstances that can affect our near future, not only the Brazilian elections:

- The American economy is hot, probably there will be an increase in interest rates and a consequent capital outflow from riskier countries, like Brazil;
- The “Commercial War”, which started with the election of Donald Trump, is materializing with serious consequences for less developed countries;
But let’s address the current situation of our economy:
- The default rate remains absurdly high;
- 62.9 million people are in default, this represents 41% of our adult population;
- In addition to this incredible figure, one must consider the huge group of unemployed Brazilians.

From an optimistic perspective, and not expecting that whoever is elected President will pull off a very significant turnaround, only in the latter part of 2019 will we be able to see some light at the end of the tunnel.

With this scenario, companies will undoubtedly see their sales dropping, or at the best remaining at the same low levels as in recent years, and with a cost structure already extremely lean.

Companies being so weakened, how can they protect themselves from a new wave of defaults? One option would be to contract Credit Insurance.

Considering this solution, there are two aspects that should be pointed out:

1. Companies need to sell more, and more safely. On their own, due to operational costs they are unable to increase their staff to analyze the risks in their client portfolio.
2. By contracting Credit Insurance, companies are able to count on a team of analysts from the Insurance Company, who not only analyze the risks, but also monitor the client portfolio 24 hours a day.

Therefore, with the help of Credit Insurance, companies can risk more, because they know they can rely on the protection provided by a solid insurance company in the event of nonpayment.

Did you know that in addition to protecting your receivables, Credit Insurance also enables you to safely leverage your sales? That was the case with one of our clients, who reduced the default rate, and at the same time increased his annual turnover from R$ 40mi to R$ 500mi. See how that was possible:

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