High interest rates in the world should dictate a tone of caution among companies

The combination of high interest rates in Brazil and abroad has led companies to postpone expansion decisions and new investments, while they await greater clarity on the global economic scenario.

Only projects considered essential or highly profitable continue to move forward, according to Itaú Unibanco economist, Pedro Renault. Meanwhile, a large part of the productive sector remains on hold.

"What we see is a prospect of lower demand ahead and a lower appetite to invest. Only the very obvious, very profitable projects end up leaving the drawing board", said the economist to CNN Money.

The assessment takes place at a time of tightening monetary policy in different economies. This week, the ECB (European Central Bank) raised interest rates for the first time in almost three years, given the acceleration of inflation driven by rising energy costs following the war involving the United States and Iran.

The monetary authority also revised upwards its inflationary projections for this year and next.

In Asia, the market also expects a new interest rate hike by the BoJ (Bank of Japan), at the meeting that ends next Tuesday (16). The expectation is that the base rate will increase from 0.75% to 1%, the highest level since 1995, reflecting the institution's concern about the inflationary impacts of the conflict in the Middle East.

For Renault, this global movement helps explain why the process of monetary easing in Brazil tends to be slower.

"There is a consensus that Brazil needs to contain the dynamics of public debt. If that happens, you create a virtuous cycle, with less inflationary pressure and room for lower interest rates," he said.

The economist also stated that the current scenario has directly affected companies' plans. Sectors dependent on credit, such as construction materials, household appliances and part of the industry, feel the effects of high interest rates more intensely, as more expensive financing reduces demand and makes new projects more difficult.

On the other hand, investments considered strategic or mandatory remain in progress. This is the case of segments linked to infrastructure, such as sanitation concessions and highways, as well as areas that require continuous investment in research and development, such as the pharmaceutical and automotive industries.

According to Blackbird partner, José Gaino, the interest rate differential continues to be important to attract foreign capital and avoid migration of resources to economies considered safer, such as the USA.

"Global factors are what have been most impacting this repricing of interest rates. If Brazilian interest rates fall while North American interest rates rise, there is a tendency for investors to prefer to allocate resources in the USA", he explained.

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Furthermore, according to Gaino, many companies have preferred to wait for a clearer definition of the economic scenario before expanding investments or assuming new financial commitments.

"What we see is a movement of waiting, of understanding what will happen in the face of all this instability in recent months. Today the businessman can wait because he is allocated a high Selic rate, yielding around 14%", said the executive in an interview with CNN Money.

The Blackbird partner also states that the main impact of high interest rates has appeared on the financial management of companies, especially among those that face increasingly longer deadlines to receive payments from customers while needing to keep operational expenses up to date.

'"What we have been observing is that companies are receiving payments with very long deadlines and need to bring this amount to the present to honor their payments. The higher cost of capital makes this process more expensive and increases pressure on business", he explained.

According to the executive, this environment has contributed to the increase in defaults and short-term credit.

In Gaino's assessment, as long as interest rates remain at high levels and global uncertainties persist, the tendency is for Brazilian entrepreneurs to maintain a defensive stance.

Source: CNN