Put André Jerusalem – 15/04/2020

Now that the first few weeks of the crisis caused by the coronavirus pandemic have passed, we can see that some of its repercussions on the economy may be even more profound than initially anticipated. Some of the first measures taken by the government to try to provide security to entrepreneurs who, overnight, saw their businesses prevented from opening, were measures to release credit to companies. It began with a timid release of bank reserve requirements, then escalated to an injection of more than R$1,455 billion into the economy through the BNDES (more than the total disbursements in 2019), and could even lead to the so-called “war budget” that is currently being discussed in the national legislature and which could allow the government to directly purchase private bonds.

Although the SELIC rate is at one of the lowest levels in history, we know that the interest rates charged by private banks have historically been very high. Additionally, because many companies have difficulty obtaining lines of credit with more attractive rates, the commercial development market has become an increasingly common option. Thus, Credit Rights Investment Funds (also known simply by their acronym – FIDCs) have become great allies of companies, as they provide credit through the advance of future receivables, that is, the FIDC acquires securities with maturity in a term by applying a discount due to the quality of the debtor of the security, meaning that the creditor company does not have to wait until maturity to receive payment.

For many, the crisis came as a violent blow, often abruptly interrupting the revenue of companies that were unable to open their doors, and many of these companies stopped honoring their payments. The “domino effect” was immediate, because while many bonds were no longer honored, funds stopped acquiring bonds from companies that needed to discount their receivables. Thus, without being able to have their receivables discounted, many companies had to suspend their payments, many of which were due to FIDCs.

The legislation of the Securities and Exchange Commission (Instruction 356) requires that at least half of the net equity of FIDCs be invested in receivables, but many funds may not comply with these limits, since many have stopped acquiring receivables. In addition, another variable has contributed to the bad moment of the funds: many investors have requested the redemption of their shares, with the aim of allocating their resources to more conservative investments, such as gold and the dollar.

Due to the difficulties that have been presented so far, as well as future difficulties that may arise, it is certain that we will still see many legislative changes in order to alleviate the situation of FIDCs and the companies that need their services. In a quick reflection on the subject, the famous phrase by Antonio Gramsci could not be more relevant at the moment (even though the philosopher was opposed to the liberal ideology): “The crisis consists precisely in the fact that the old is dying and the new cannot yet be born. In this interregnum, a great variety of morbid symptoms appear”.