(Folha de S. Paulo) Daniel Wainstein, from Seneca Evercore, says the country struggles to attract foreign investment and warns about the high debt levels of mid-sized companies.
Alexa Salomão - São Paulo
Skeptical about the Brazilian economy and concerned about the health of companies. That’s how Daniel Wainstein, managing partner at Seneca Evercore, defines himself. His firm is a leader in independent financial advisory, specializing in mergers and acquisitions, capital markets, and debt restructuring. With an insider’s perspective on businesses, Wainstein warns that the mid-sized segment is suffering.
“What we’re seeing is a shrinking of companies, with the added challenge that they can’t even adjust their workforce as needed,” he says.
“Many companies that have no cash on hand can’t even lay off employees to right-size their operations. Socially, that’s a good thing, but for the company, it’s a snowball effect.”
Wainstein regrets that President Luiz Inácio Lula da Silva has taken a reactive stance on fiscal adjustment, which he considers the only way for the Central Bank to halt high interest rates—and now he fears the worst.
“Our experience in Brazil is that, unfortunately, in the year before a presidential election, short-term policies already start kicking in.”
You work with restructuring, mergers, and acquisitions. How would you define the current moment for companies?
Many companies are heavily leveraged. They took on debt when interest rates were low. Then came the post-election period and the credit crisis triggered by the Americanas scandal. As a result, many companies took on even more expensive debt to roll over existing obligations, often with special situations funds [which negotiate debt restructuring between debtors and creditors].
Growth has also been an issue. When growth is low, many companies don’t grow at all.
On top of that, interest rates are the biggest problem. They remain high while revenues decline. Companies can’t generate cash to invest. They lose productive capacity. Revenues drop again. What we’re seeing is a shrinking of companies, with the added challenge that they can’t even adjust their workforce. Many companies with no cash on hand can’t even afford layoffs to right-size their operations. Socially, that’s a good thing, but for the company, it’s a snowball effect.
Is this situation widespread, or are some sectors in worse shape than others?
It’s never completely generalized, and it’s hard to pinpoint specifics. Even within the same sector, there are crises and opportunities at the same time.
Take real estate, for example. The middle-class housing market has stalled. However, the Minha Casa, Minha Vida (government-subsidized housing) and high-end real estate sectors are doing very well. The sector is booming in Rio de Janeiro, but that’s not the case in most other states.
Overall, mid-sized companies are struggling. Sectors that rely on international supplies—or those selling to companies that depend on them—are feeling the pressure. The same goes for businesses that are already highly leveraged but haven’t grown, manufacturers that lack differentiation, or companies with financially troubled clients. Not surprisingly, we’re seeing a record number of judicial recovery (RJ) filings.
There have been just over 2,000 judicial recovery filings. That’s a concerning number, but in a country with millions of companies, is it really that high? Are companies looking for alternatives before resorting to judicial recovery?
Absolutely. Judicial recovery should be the last resort. It’s disruptive for the company, its clients, and its market positioning. Our goal is to help clients avoid traditional judicial recovery by pursuing extrajudicial restructuring and debt substitution.
Creditors themselves understand that pushing too hard could trigger a wave of defaults so large that it would negatively impact them, including major banks. There’s room for negotiation.
Companies are seeking solutions, and that’s an important message. The key is to find the best way to survive. In difficult times, while some are struggling, others see opportunities—like the guy who sells handkerchiefs when everyone else is crying.
Given this environment, should we expect more business reorganizations, mergers, and acquisitions?
Yes, there are pockets of excellence—companies that have an opportunity to consolidate their markets and provide solutions for struggling businesses. These moments create new leaders because well-capitalized companies with strong management and the right advisory can gain market share and turn around struggling firms.
Sometimes, it’s not even about buying another company outright. Bringing in an investor or a strategic partner to inject capital can be a viable solution. These types of transactions are likely to continue and even accelerate.
Some sectors are particularly attractive, like financial services. In Brazil, this industry is undergoing a revolution. Major banks are losing strength, while independent firms—particularly wealth management companies—are gaining ground. More and more, firms not tied to traditional banks are capturing high-net-worth and middle-class investors.
There’s also significant investor interest in renewable energy companies. This sector isn’t as affected by the macroeconomic issues we discussed. Even if a company is burning cash, investors are willing to fund it because they’re looking at a much longer horizon than in other industries.
Some say that with Donald Trump expected to cut support for green projects, Brazil could attract investors in this segment. Have you noticed any shift in that direction?
It could happen, but I haven’t seen it yet. Frankly, I think Brazil is in a difficult spot, largely disconnected from what’s happening internationally. The country has been affected by global crises before, but right now, our problems are internal.
Most funding today comes from investors who are already here. New foreign capital is scarce. Brazil is not the hot spot, and it won’t be until we clean up our own house—it’s as simple as that.
Investment funds used to say that Brazil wasn’t attractive under the previous government because it ignored environmental concerns. Then a new government came in, and there was hope that Lula would govern like he did in his first term. That didn’t happen. Many international investors believed in that promise, lost money here, and now face struggling companies and currency devaluation.
What’s missing from Lula’s leadership this time?
Fiscal discipline and listening to the market—at least a little. He needs to stop treating the market as his enemy. He can’t live in a parallel universe. The government can’t keep spending without creating inflationary pressure. Interest rates won’t come down if inflation remains high. Expecting a miracle won’t work. Instead of boosting his popularity, it’s making things worse.
Lula’s first term was the opposite of what we’re seeing now. Agribusiness and commodity prices were at record highs. Last year, they declined. You can’t pursue the same policies in a completely different environment. You can’t play the violin at a funk party. He needs to adjust his expectations to match the current economic reality, where the wind isn’t blowing in his favor as it was before.
You have extensive experience in the financial market and have witnessed all kinds of crises. What’s your biggest concern?
Over the decades, we’ve seen everything, and Brazil is like a Phoenix that always rises from the ashes. But my biggest concern is already happening—the government’s continued expansionary spending policies.
Without proper fiscal responsibility, inflationary pressure remains, forcing the Central Bank to keep interest rates high. That’s a terrible scenario for already weakened companies. We could see further credit tightening.
There’s also another issue. Historically, in Brazil, the year before a presidential election brings short-term policies. Lula’s approval ratings are deteriorating, and unfortunately, the usual response in these moments—though I hope it won’t happen—is to increase spending even more.
Profile | Daniel Wainstein, 54
Born in Salvador (BA), he holds a degree in economics from USP (University of São Paulo), an MBA from the University of Rochester (USA), and a PhD in Economics from Brown University (USA). He is currently completing a master’s degree in neuroscience and mental health psychology at King’s College London (UK). He has worked at Lehman Brothers and Goldman Sachs, where he was the first Brazilian partner in the bank’s history. He founded Seneca Evercore in 2013.
Published in Folha de S. Paulo and available at: https://www1.folha.uol.com.br/mercado/2025/02/brasil-nao-e-a-bola-da-vez-e-dinheiro-novo-vindo-de-fora-e-pouco-diz-especialista-em-fusoes-e-aquisicoes.shtml
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