18 de diciembre de 2015 / 19:24 / hace 2 años

Brazil's companies cut investments, stash cash for an ugly 2016

7 MIN. DE LECTURA

SAO PAULO/BRASILIA, Dec 18 (Reuters) - Brazil's economy is reeling from its worst year in a quarter century, and judging by major companies' investment plans for next year, things are about to get worse.

The biggest names in Brazilian retail, construction, steel, autos and oil are slashing capital spending budgets as they abandon hopes of a swift recovery in Latin America's largest economy and in global commodity markets.

Mining giant Vale SA plans to cut investments by a quarter and oil company Petrobras by a fifth in 2016. Brazil's biggest retailer, GPA SA, is cutting investment as much as 40 percent in 2016 to the lowest level in seven years.

Although Brazil's other corporate titans, such as power utility Eletrobras SA and debt-laden telecoms provider Oi SA haven't yet given forecasts, there are growing signs that they will also be making steep cuts.

Interest rates at 14 percent and rising have made private financing difficult for many projects. Brazil's interventionist policies and generous public financing - once the backbone of corporate investment plans - are also in sharp retreat.

The loss of Brazil's prized investment grade credit rating on Wednesday sealed its fall from grace after a high-flying commodities boom in recent years, and will push up borrowing costs as more investors back away from the country.

Yet the biggest obstacle to new investment may be Brazilians' own confidence in a recovery, which dissipated this year as policymaking stalled amid efforts to impeach President Dilma Rousseff.

"The outlook for 2016 is awful," said Mario Bernardini, a director at national heavy machinery trade association Abimaq. "In a recession like this, companies are protecting their cash."

Capital investment in Brazil has fallen for nine straight quarters and economists widely expect that streak to continue through next year, with an accumulated drop between 6 and 12 percent from an already weak 2015.

That would represent a decline on the scale of 60 billion to 130 billion reais ($17-34 billion) in fixed investments, or around 1-2 percent of gross domestic product, according to Reuters calculations.

As Brazilian blue chips further cut budgets in recent weeks, more economists slashed their 2016 outlook. Many now expect another year of economic contraction on par with the more than 3 percent drop forecast for 2015.

"The economy is bad and next year looks worse," said GPA's Chief Executive Ronaldo Iabrudi, in blunt comments last week. The owner of supermarket chains Pao de Acucar and Extra has already cut capital spending 10 percent this year from 2014.

'War Economy Decisions'

Economists at Banco Bradesco tracking news of capital spending saw about half as many corporate investments announced this year compared with three years ago. Among the sectors monitored, less than 50 percent had investment news in recent months, down from a peak above 80 percent in 2010.

Crumbling consumer confidence has forced homebuilders and carmakers to stockpile inventory, leading to a glut of unused capacity. Nearly a quarter of industrial capacity is currently idle, according to the National Confederation of Industry.

The pullback is affecting foreign as well as domestic players. Honda Motor Co put off opening a new Brazilian factory early next year. Production of heavy trucks, a key capital good, has also fallen by half this year. Demand for agricultural machinery is down by a third.

Both drops accelerated in recent months, according to data from national automakers' association Anfavea. The group's president, Luiz Moan, said sales should continue falling in 2016, putting off hope of a recovery to the end of next year.

Cement and steel groups also forecast shrinking demand in 2016. Steelmaker Cia Siderúrgica Nacional SA, or CSN, plans capital spending of 1.5 billion reais ($385 million) or less next year, compared to 1.7 billion reais in the first nine months of 2015.

Benjamin Steinbruch, CSN's chief executive, said sacrificing investments was one of many "war economy decisions" he faced.

Vale, the world's largest iron ore miner, is also cutting 2016 investments to about three-quarters of what it spent in 2015 and half what it invested in 2014, after iron ore prices plunged about 70 percent in two years.

The few bright spots are concentrated among select exporters, such as wood pulp producers Fibria SA and Klabin SA, who gained competitiveness from a stronger dollar without suffering a collapse in the prices of their commodities.

Snared by Scandal

Plunging oil prices and a devastating bribery scandal have also upended investment plans at state-run oil company Petroleo Brasileiro SA, or Petrobras.

Chief Executive Aldemir Bendine already slashed the capital spending budget to $19 billion in 2016, down from $23 billion this year and more than $40 billion in 2014. He said in recent days there is a good chance of another cut early next year.

For much of the past decade, Petrobras was investing more than any company on earth and its spending on refineries and offshore oil fields was the cornerstone of President Rousseff's signature "Accelerated Growth Program".

But the oil giant and its contractors were snared this year in Brazil's biggest corruption investigation ever, with senior executives convicted of contract fixing and political kickbacks.

The graft probe has paralyzed projects at Petrobras and Brazil's biggest engineering groups, which also account for the lion's share of civil construction in the country.

Concerns of legal risks and blacklisting from public contracts have made credit scarcer for the engineering groups, which are selling assets and protecting cash.

In addition to the effects of central bank rate hikes and debt downgrades on market rates, loans from state development bank BNDES have gotten scarcer this year as the government reins in costly subsidies.

Still, loan requests have fallen more sharply than the bank's disbursements this year, suggesting extreme caution is also holding back investment activity.

In the first ten months of this year, BNDES consultations, a leading indicator of loan requests, fell by nearly half from a year earlier, to the lowest level in eight years.

"This was really the worst year in our series," said BNDES economist Marcelo Nascimento, who is forecasting a rebound in investment beginning in late 2016.

$1 = 3.9 Brazilian reais Reporting by Brad Haynes and Silvio Cascione; Additional reporting by Jeb Blount and Stephen Eisenhammer in Rio de Janeiro, Alberto Alerigi Jr. in Sao Paulo; Editing by Christian Plumb and Mary Milliken

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below