SAO PAULO, April 19 Declining borrowing costs in
Brazil will help local companies cut their debt and speed up
refinancing efforts with creditors, even if they fail to
jump-start economic growth in the short run, Moody's Investors
Service said in a report on Wednesday.
The central bank's rate-reduction cycle should have the
immediate effect of alleviating the burden of companies
struggling with large chunks of real-denominated debt, the
report said. Brazilian companies pay the highest borrowing costs
among the world's major economies.
Policymakers lowered the benchmark Selic rate this month by
100 basis points to 11.25 percent, the biggest reduction since
June 2009. They had made cuts totaling 3 percentage points at
the last four meetings.
Still, a robust credit revival hinges on how demand reacts
after almost three years of recession, analysts led by Barbara
Mattos said in the report. Banks will remain wary of giving out
new credit without "tangible indications of economic growth and
policy continuity," the report added.
"We see only small short-term effects on credit supply and
demand, both for investment and consumption, gaining momentum
only gradually," the report said.
The report underscores the reigning view among analysts that
a recovery of credit in Brazil, which is in its deepest
recession in more than a century, requires that individuals and
companies first cut their debt burden further over the next year
Banks are scheduled to unveil first-quarter results next
week, with analysts expecting them to keep a lid on consumer
delinquencies and raise loan-loss provisions at a slower pace
than in prior quarters. Last year, Brazilian banks reported
lower profits for the first time in at least 15 years.
According to the analysts, companies will use any excess
cash to pay down debt, while banks will curb loan disbursements
until at least year-end 2018.
In a second wave, credit supply and demand will rise once
deleveraging is complete and the economy returns to growth amid
low inflation and cheap borrowing costs, the report said.
(Reporting by Guillermo Parra-Bernal; Editing by Bill Rigby)