Corporate funding gets back to pre-crisis levels
Funding to corporate Brazil has returned to pre-recession levels. Yet, unlike in periods prior to the crisis, the boost this time comes from strong growth in corporate debt securities and equities. Capital markets have been more than compensating the drop in subsidized Brazilian Development Bank (BNDES) credit. In addition, bank lending to businesses have accelerated again last year, after very sluggish growth during the crisis.
According to a survey by the Center of Capital Market Studies (Cemec) of the Economic Research Institute Foundation (Fipe), corporate funding via equities, debt and BNDES lending totaled R$314.2 billion in 12 months through September 2019. It is the same level of 2013, when the federal development lender reached a record R$190.4 billion in subsidized loan originations.
In 2013, the total of BNDES loans and corporate issuance also reached R$314.2 billion, according to Cemec. The sum as of September 2019 is only lower than of 2014, when BNDES extended R$187.8 billion in directed credit and the capital market had R$135.3 billion in debt and equity issues, resulting in a combined amount of R$323.1 billion.
However, the sum that companies raised on the Brazilian debt and stock markets in the 12 months through September was responsible for propelling corporate funding to the pre-crisis levels. Whereas BNDES disbursements fell to R$63.8 billion, non-financial companies raised R$250.7 billion on capital markets, or twice as much as in 2013, height of the subsidized federal lending."We are consolidating a complete revolution in how companies get funding in Brazil," says Professor Carlos Rocca, coordinator of Fipe's Cemec. "It gets difficult to say there was restriction of medium- and long-term financing because of the reduction of BNDES lending when considering this capital-market growth," he says.
The vice president of the Brazilian Financial and Capital Markets Association (Anbima), José Eduardo Laloni, says that private-sector credit now becomes "preponderant in relation to directed state credit," which was the main source of long-term funding to companies before the crisis.
In 2019, Brazilian companies issued a record volume of securities on the domestic and external markets, according to Anbima: R$498.9 billion as of November, compared with R$310.9 billion in the same period of 2018, a 60.5% gain.
Sales of bonds and hybrid instruments on the domestic market reached R$305.9 billion, compared with R$237.4 billion in 2018...
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