Uncertainties Lead Companies to Prioritize Cash Reserves

With high interest rates and economic and geopolitical instability, companies aim to boost liquidity

The expectation of prolonged high interest rates and ongoing economic and geopolitical uncertainties has led more Brazilian companies to reinforce their cash positions, ensuring liquidity levels considered safe to withstand potential turbulence over the next 12 to 18 months. This is especially true among mid-sized companies, those exposed to non-essential consumer goods markets, or those coming out of investment cycles, where the guiding principle is to secure a stronger financial cushion in a tougher scenario.

“There’s a situation that is choking the liquidity of Brazilian companies—not the giants, but those paying a real interest rate of 14% or those that are more leveraged,” says Daniel Wainstein, founding partner at financial advisory firm Seneca Evercore.

According to him, the mismatch between financing costs and the pace of revenue growth affects the ability to retain earnings and generate cash flow.

The situation is not universal, even within specific sectors, Wainstein notes. Industries such as financial services, natural resources, utilities, and certain construction segments have, for various reasons, maintained solid results and positive cash flow. Meanwhile, companies whose performance is tied to Brazilians’ disposable income are suffering more.

A survey by Valor Data, considering the 67 non-financial companies in the Ibovespa index (excluding Vale and Petrobras), shows that at the end of Q1, these companies held R$433.3 billion in available resources, including cash and financial investments. This figure is higher than the R$407.1 billion reported in current assets a year earlier, but marks a 10.4% decline from the previous quarter. This indicates that companies are being more conservative than a year ago while also facing higher disbursements or greater challenges in generating cash compared to the previous quarter.

One of Brazil’s youngest steelmakers, Aço Verde do Brasil (AVB), recently issued R$300 million in non-convertible debentures as a "cash reinforcement to support the continuity of operations." CEO Silvia Nascimento told Valor the funding was strategic to maintain financial strength amid a challenging sector context: competition from imported steel, particularly from China, continues to grow and puts pressure on prices.

According to the CEO, high interest rates are discouraging investment, and the approach of Brazil’s 2026 presidential elections suggests continued instability over the next 18 months.

“Having cash to potentially extend customer payment terms or maintain higher inventory levels is very important. We decided to raise funds early in case market conditions deteriorate further, but also to ensure we have cash. In other words, to strengthen working capital and liquidity.”

Wainstein adds that beyond companies seeking new credit lines to boost cash positions, there are others engaged in liability management—refinancing short-term, higher-cost debts to reduce servicing costs and, in turn, lower amortization.

“This is also a way to preserve cash. We can’t generalize, but overall, the environment is more challenging for the vast majority of companies. And the political context tends to worsen the outlook,” he says.

Klabin, Brazil’s largest producer of packaging paper and corrugated boxes, has also turned its focus to cash and financial leverage after investing R$34.67 billion in expansion over the past decade. The company now prioritizes cash generation and expects at least a two-year gap before the next investment cycle.

“Now is the time to be conservative—not just with cash, but with debt extensions, which we’ve already done,” says CEO Cristiano Teixeira. According to him, transformational investments are off the table for the next 18 months at least. “Why? Because the risk scenario—not just in Brazil, but globally—doesn’t allow for it.”

Belmiro Gomes, CEO of cash-and-carry retailer Assaí, says the company is also focused on deleveraging. “We were caught by surprise by interest rate hikes, at a time when the company had just made a major investment—the acquisition of Extra. But Assaí has historically been a strong cash generator. Today, the cost of servicing the debt is approximately 50% of cash generation, which allows for a short-term deleveraging outlook.”

The six publicly traded higher education groups—Ânima, Cogna, Cruzeiro do Sul, Ser Educacional, Vitru, and Yduqs—are also prioritizing cash generation, with an eye on the sector’s expected consolidation. “Free cash flow generation can serve as a trigger for valuation multiples,” says a Morgan Stanley report.

While consolidation has not yet materialized, these institutions are focusing on cash generation to increase dividend payouts and regain investor interest, which has waned in recent years.

According to Roberto Valério, CEO of Cogna, the group already has enough assets to meet current demand, and thus no need for new investments. “Generating cash is a priority—it delivers value to shareholders.” Last year, the company resumed dividend payments after a five-year hiatus.

“The in-person education market as a whole should grow between 1% and 1.5%. There are no major growth levers. Listed companies, due to their operational efficiency, may perform slightly better. Given this, major groups and investors are increasingly focusing on cash generation, profitability, and dividends,” says Caio Moscardini, an analyst at Santander.

Fleury is another group focused on cash. “We have a capital structure appropriate for a high-interest environment, with a net debt/EBITDA ratio of 1x,” says Jeane Tsutsui, CEO of the diagnostic medicine network.

“We remain focused on strong operational efficiency and cash generation while maintaining appropriate leverage,” she says. According to the executive, the group maintains financial discipline despite a strong M&A strategy in recent years. Since 2017, Fleury has announced R$2 billion in mergers and acquisitions. “The biggest challenge now may be acquiring at the right price.”