The Central Bank's latest interest rate cut, which reduced the Selic rate to 14.25%, is expected to bring little relief to the financial system, which is experiencing its longest period of double-digit interest rates since 2009. With inflation expectations on the rise, economists no longer expect the Selic rate to fall below 14% this year and see no chance of the rate returning to single digits this decade.
The prospect that the storm will last longer than expected is already reflected in bank balance sheets. Provisions for doubtful debtors in the national financial system jumped from a range between 5.7% and 6.9% of the total portfolio, maintained for more than a decade, to 7.9% in February 2026, the highest level in the Central Bank's historical series.
Although the higher risk environment makes it more difficult to obtain new loans, the tide of bad debt has generated a wealth of opportunities for so-called vulture funds — which, through different strategies, seek to recover delinquent debts and renegotiate liabilities of companies on the verge of bankruptcy.
Data from Uqbar shows that the number of FIDCs (Investment Funds in Credit Rights) focused on debt recovery grew from 140 to 157 between January 2024 and April 2026, with total assets of R$ 22.5 billion. "With the worsening economic environment, segments that buy bad debts tend to grow from now on," says Alfredo Marrucho, analyst at Uqbar.
Jive Mauá, a pioneer in the segment in Brazil, is structuring a new fund for fundraising in the second half of the year, aiming to take advantage of the increased opportunities in distressed credit.
"We are looking for several hundred million to take advantage of this market," says Bruno Gomes, partner and head of the Distressed & Special Situations area. According to him, the volume of business evaluated by the firm grew between 20% and 30% compared to the previous year.
With a philosophy of always leading recovery processes, Jive Mauá is known for writing large checks. In the last 15 months, the asset manager invested R$ 1.8 billion in approximately 20 to 25 transactions. The firm, with R$ 25.5 billion under management, operates both in the purchase of non-performing loans and in the refinancing of debts of distressed companies, but prefers single names : cases mapped individually.
"In these cases, we conduct a very thorough analysis of the debtor's assets, defining the debt recovery strategy in advance so that, the next day, we can press the button and begin the recovery strategy."
The strategy is similar to that adopted by Mobius Capital, which has also taken advantage of the increased supply of distressed credit to structure its third fund — with the first closing scheduled for the end of July. With two previous funds and a network of co-investments, the asset manager now has approximately R$ 800 million in assets under management distributed across 11 vehicles.
Founded in 2021 by former partners in the structured credit area of Credit Suisse, Mobius Capital operates exclusively in high-yield credit, navigating between structured credit structures, litigation assets, and real assets.
"We avoid excess liquidity," says Renato Herkenhoff, founding partner of Mobius Capital. "Opportunities that used to knock on the door once a month now knock once a week, and almost once a day."
According to Herkenhoff, most of the opportunities that have arisen are in agribusiness – a sector that, in his assessment, is experiencing a "change of hands" between producers who have leveraged themselves too much and are losing land, and those who are arriving with new capital to buy it.
Mobius Capital has already structured operations using this model: it buys the farm, holds the asset, and offers the producer the option to repurchase it at a pre-fixed price. If the producer fails to do so, the management company keeps the land.
With bankruptcy filings in the sector at historic levels, agribusiness is experiencing an even more acute moment than the rest of the economy.
At Banco do Brasil, the country's largest rural lender, delinquency in its agricultural loan portfolio jumped from 0.6% in December 2022 to 6.2% in March 2026 – a historic peak for the series. To protect itself, the bank increased its provisions to 9.7% of this portfolio, which is exposed to estimated losses of R$ 40.6 billion.
But the problem of default is not limited to agribusiness. Even banks without significant exposure to the sector have felt the weight of the interest rate cycle on their balance sheets.
With the need to clean up their balance sheets, banks have significantly increased the supply of non-performing loan portfolios to specialized debt recovery investment funds (FIDCs).
"The more problems a bank has, the more they want to sell," says Richard Ionescu, CEO of IOX Capital. The asset manager has R$4 billion under management, including R$350 million in NPL FIDC — an acronym for non-performing loans , so-called bad debts, debts that the borrower has stopped paying and that the bank cannot recover.
To purchase assets from a bank, funds must first go through an approval process that includes an assessment of money laundering prevention.
Once accredited, they begin to receive offers continuously — in two formats: mass portfolios, with hundreds of cases sold at a discount, or single names , cases negotiated individually. "The supply has increased by 50% or more compared to previous months," says Ionescu. "We have a truckload of things to look at."
Neo Investimentos also buys these portfolios, but focuses on individuals — consumer debt, credit cards, and finance companies that banks and retailers are unable to recover. The discount is aggressive, says Arnaldo Ferreira Braga Neto, partner and head of credit at Neo Investimentos. "We buy for 2% to try to recover 5%. After deducting costs, I end up with 4%," he said.
According to Ionescu of IOX, the NPL market in Brazil still has a lot of room for growth. "There aren't 20 good players in this market. There's plenty of room to grow. In fact, I think it's only just beginning," he says.
