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

viernes 18 de diciembre de 2015 15:21 GYT

By Brad Haynes and Silvio Cascione

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."   Continuación...