The business environment in Latin America, especially in Brazil, faces a combination of geopolitical risks , corporate governance failures, high interest rates, and persistent inflation.
And this combination is decisive for downgrading even companies that have relatively stable operational fundamentals in terms of liquidity and cash flow, as is the case with Braskem – which saw its rating from Fitch , a risk rating agency, downgraded from CCC+ to CC in December, due to the high risk of restructuring its debt, among other factors.
“Every company is highly dependent on refinancing. If the market is closed, the cost of capital is higher, especially in countries with high interest rates,” says American Saverio Minervini, head of corporate ratings for Latin America at Fitch, in this interview with NeoFeed .
The credit rating agency monitors 800 companies across Latin America, 450 of which are Brazilian. In another monitoring, by country, Fitch maintained Brazil's credit rating at 'BB' in February, with a stable outlook (i.e., two steps away from investment grade).
According to him, Fitch envisioned a negative assessment of the region for 2026 at the end of last year due to several factors. "This year we will have three very important elections in Brazil, Colombia, and Peru, and from July 1st, a new negotiation of the free trade agreement between the United States, Canada, and Mexico, in addition to the issue of tariffs," he points out, recalling that at the time of the assessment, the invasion of Venezuela and the current conflict in the Middle East were not even on the radar.
Minervini declined to speculate on whether the current rise in the price of a barrel of oil will hinder the downward trajectory of the Selic rate , but stated that it certainly won't help. "We have a war going on right now, and the world doesn't expect interest rates to fall so quickly."
According to the Fitch executive, the biggest risk for Brazilian companies today is governance. "This isn't just a corporate problem; it's a structural issue in the country," he says. This is because investors are becoming more selective, which particularly affects companies with weak structures.
"In these companies, any shock—exchange rate, interest rates, or inflation—can have a significant impact. It's the combination of factors that creates a kind of 'perfect storm,' because the fundamentals are already weak," he says.
According to Minervini, Brazilian companies are already adopting the appropriate stance to navigate such an uncertain year. The strategy has been to extend debt maturities for more than two years—essentially "buying time"—in the face of high interest rates and uncertainty both in Brazil and abroad.
"In such a volatile environment, the message is to maintain financial discipline and protect the balance sheet until the scenario becomes more predictable," he says.
Read below the main excerpts from Minervini's interview:
The Trump administration is characterized by its unpredictability. Is it possible to say that geopolitical risks have become the main concern for companies, above the macroeconomic variables of countries?
Yes, at the end of last year, we detected a near-negative outlook for Latin American companies, based on these geopolitical risks. When you analyze the company from the bottom up—that is, looking first at fundamentals such as cash flow figures—everything is stable. But moving to macro analysis, focused on the economic environment, the risks are very high. And this was done after the tariffs, but before the invasion of Venezuela and the current conflict in the Middle East.
What was the biggest factor in this negative assessment for the region?
This year we will have three very important elections in Brazil, Colombia, and Peru, which reflect roughly 80% of our portfolio in Latin America. In addition, starting July 1st, the new negotiations for the USMCA, the free trade agreement between the United States, Canada, and Mexico, will begin. And then there's the issue of tariffs.
How does this combination impact businesses?
It raises the governance risk for all companies in Latin America. That's what foreign investors are worried about. Many companies, like Braskem, have entered Fitch's CCC rating, which is almost default , not because they have liquidity or cash flow problems, but because of macroeconomic factors from governments, such as high interest rates, or geopolitical tension that causes uncertainty.
How does this affect the ratings of these companies?
Every company is highly dependent on refinancing. If the market is closed, the cost of capital is higher. Brazil and Colombia have, in addition to inflation above the target, very high interest rates – 15% in Brazil and above 10% in Colombia. If President Trump raises tariffs tomorrow, we know it will impact the exchange rate of the real, and companies will be even more exposed to exchange rate fluctuations and interest rates.
In October, still under the effect of the tariffs, Fitch reported that Brazilian companies with imminent refinancing needs and limited access to international markets would be the most vulnerable. Has this situation worsened?
What we wrote last year is that about 10% of the companies in our portfolio had short-term debt representing more than 20% of their total debt, while available liquidity was less than that. So far, the numbers haven't worsened, but they haven't improved either. Companies are still releasing their fourth-quarter results, we'll analyze them, but the situation remains unsustainable. It's like being on a treadmill at maximum speed: at some point, these companies simply can't run any faster.
"Having short-term debt and low liquidity is like being on a treadmill at maximum speed: companies can't run any faster."
Does the current rise in oil prices threaten a drop in the Selic rate?
I can't say if it will impact the start of the interest rate cycle decline; that's a matter for the Central Bank, but it certainly doesn't help. Companies in Brazil with leverage of twice their EBITDA, for example, were already using, on average, 50% of that EBITDA just to pay interest expenses. Take the example of Raízen, which had an excellent rating and is now rated CCC, not because of its management per se, but because there is more uncertainty, and in this situation, the market becomes defensive. We now have a war going on, and the world doesn't expect interest rates to fall so quickly.
What explains the stock market's surge here this year?
The growth of the local market occurred because demand came mainly from foreign investors. They were engaging in arbitrage: with interest rates at 15% in Brazil, the return seemed very attractive. Thus, companies with very high credit quality—such as utilities ( essential public service companies, usually regulated ) with AAA ratings in Brazil—were able to issue bonds that were well received abroad. But this movement is not sustainable.
President Trump warned over the weekend that he intends to attack drug cartels in Latin America, such as those in Mexico and Colombia. What kind of effect would this American militarization have on the region's economy as a whole?
It's difficult to predict the impact; we would need to analyze each case individually, but it's yet another problem for Latin America, plunging it into a dark period. Ideally, we should use this rapprochement between the United States and the region to work together in the long term, integrating regional trade and strengthening near-shoring . More than 30% of global oil is here in the Americas; there are great opportunities with lithium in Chile, Bolivia, and Argentina. There are many opportunities. Unfortunately, the main issue now is security.
In the case of Brazilian companies, which are now facing, in addition to this international geopolitical tension, the effects of the Banco Master financial scandal, which risks are likely to have the greatest impact: exchange rate fluctuations, a potentially smaller reduction in interest rates, or increased inflation?
The biggest risk for Brazilian companies today is governance. This isn't just a corporate problem—it's a structural issue in the country. Investors are becoming more selective, and this especially affects companies with weak structures, dependent on refinancing, or exposed to additional risks, such as the IFEX, Fitch's indicator that measures how exposed a company is to external risks. In these companies, any shock—exchange rate, interest rates, or inflation—can have a significant impact. It's the combination of factors that creates a kind of 'perfect storm,' because the fundamentals are already weak.
Does corporate governance weigh heavily in Fitch's analysis?
Good practices don't guarantee upgrades , but deficiencies lead to clear penalties. Companies with overly dominant shareholders or opaque structures can lose one or two rating levels. And, in several recent cases, part of the deterioration stemmed precisely from governance failures.
"Companies with very dominant shareholders or opaque structures may lose one or two rating levels."
Of the large companies that Fitch monitors, such as Braskem and Ambipar, what is most concerning from a performance standpoint?
In the case of Braskem and Ambipar, the problems were much more linked to global factors than to issues specific to Brazil. In the petrochemical sector, for example, international spreads fell across the board—companies in the United States, the Middle East, and Latin America were affected in the same way. In the case of Braskem, this was compounded by local issues, such as the problem in Alagoas, which aggravated the situation. But, overall, it was a global dynamic.
In February, Fitch maintained Brazil's credit rating at 'BB', with a stable outlook, indicating that an improvement depends on a credible fiscal plan – which is only expected to occur in 2027. Could the external and internal tension, with the Master case, somehow impact the Brazilian economy to the point of leading Fitch to reassess the country's rating?
The evaluation of a country and the evaluation of companies follow different logics. Brazil's rating ('BB') does not significantly alter ratings on the national scale, but it directly influences the ratings of companies on the international scale. This is because many companies, even those with a better credit profile than the country, are limited by the so-called country ceiling —the sovereign ceiling of the country. In the case of Brazil, this ceiling is 'BB+', which prevents companies with stronger fundamentals from advancing beyond this level. Almost all the large companies we evaluate end up having their international rating restricted by the country's rating, which we call the sovereign rating.
Besides a strict fiscal plan, what moves would the next government need to make to raise Brazil's rating?
What has the biggest impact doesn't depend on the government, but rather on the Central Bank: lower interest rates.
China announced last week a reduction in its economic growth target to 4.5%, the lowest in three decades. What is the impact of this decision on companies here in Brazil?
From a corporate perspective, we don't see a significant impact from China's slowdown on the large Brazilian companies we evaluate. Even with Chinese GDP growing less, demand for products like pulp, oil, and energy remains practically stable.
Was this expected?
Yes, because China continues to purchase volumes similar to those of previous years. Furthermore, Brazilian companies in these sectors are generally low-cost producers on a global scale. This means that, even in a weaker growth environment in China, they tend to maintain competitiveness and should not suffer a material impact.
And is the surge in oil prices likely to harm Brazilian companies?
Yes, in some sectors. But if the price of oil remains high, this tends to favor Petrobras and the entire energy chain. The same applies to many commodity companies in general, which can benefit from this scenario. On the other hand, sectors more sensitive to interest rates—such as retail and consumer goods—remain vulnerable.
Given high interest rates, electoral uncertainty, and the Banco Master scandal, which increase risks, what is Fitch's message to Brazilian companies on how to manage their businesses in such a turbulent year?
Brazilian companies are already adopting the appropriate posture to navigate such an uncertain year. There is a clear decline in investments and a priority on strengthening their financial profile. The strategy has been to extend debt maturities for more than two years—essentially "buying time"—in the face of high interest rates and uncertainty both in Brazil and abroad. Over the past two years, companies have been operating defensively: postponing investments, reducing leverage, strengthening liquidity, cutting costs, and preserving EBITDA and cash margins. In such a volatile environment, the message is to maintain financial discipline and protect the balance sheet until the scenario becomes more predictable.
