Repatriating Cash from Brazil

The purpose of this call was to assess the impact COVID-19 crisis has had on cash and treasury management in Brazil.

The bad news is that, some things, such as currency volatility, administrative and tax burdens, and liquidity have got even worse than they were before the crisis. The “good” news is that this remains within the levels of what you can expect in the country – as one participant put it: this is difficult, but not much worse than usual.

The main impact has been due to the volatility of the Real (BRL): it went from 4.1 to the USD at the beginning of the year to over 5.8 at one point. It is currently at about 5.1. This has increased the cost and difficulty of hedging. It has also created unexpected issues for some participants, as the solutions they have put in place to hedge the currency can create distortions in the local balance sheet and P&L, depending on whether the hedge is onshore or offshore. There is some re-assessment of those strategies going on.

Liquidity difficulties have put a lot of pressure on receivables, with many customers requesting longer payment terms.

Many participants fear a further increase in taxes, as the virus has caused a reduction in receipts and an increase in expenditure for the government. Brazil is hardly unique in this respect.

Overall, the positive takeaway is that the crisis has not led to any tightening of the existing restrictions or the imposition of new regulations or exchange controls. Unfortunately, this means that a country which was already challenging remains so.