Brazil's corporate solvency crisis spreads from retailers to petrochemicals

The collapse of Casas Bahia — with R$17.3 billion in debt, the closure of 298 stores and nearly three thousand layoffs — would be enough to dominate any day's news cycle. What makes this Tuesday different is what the episode reveals when read alongside the rest of the headlines: Brazil is in the throes of a full-blown corporate solvency crisis, and it is spreading from sectors mired in structural difficulty to companies that, until recently, appeared to be on a recovery path.

Casas Bahia is the most visible symbol, but it is not an isolated case. Braskem, one of the largest petrochemical companies in the southern hemisphere, was downgraded by Fitch from "C" to "RD" — restricted default — after failing to pay interest on financial obligations while negotiating a broad restructuring with creditors. On the same day, its Mexican joint venture, Braskem Idesa, filed for Chapter 11 in the United States. The combination of two simultaneous events at a single publicly listed company signals that Braskem's restructuring process has entered a critical phase that goes well beyond routine renegotiation. Meanwhile, Valor Econômico reports that judicial and extrajudicial reorganizations in Brazil have jumped 66% in an environment of high rates and tight credit, driven primarily by agribusiness — a sector that, until recently, was seen as the great shock absorber of the Brazilian economy.

The common denominator is interest rates. The Selic, elevated for a prolonged period, is producing a cumulative erosion effect that corporate balance sheets are now laying bare. Bank delinquency is at record levels among individuals and at the worst readings since 2018 for corporates, according to Valor. Milton Maluhy Filho, CEO of Itaú Unibanco, said household income commitment remains elevated. A Serasa Experian survey released Tuesday reinforces that reading: 53% of Brazilian workers reach the end of the month without enough money to cover all their expenses. Novo Desenrola, the government program aimed at renegotiating overdue debts, moved R$25.51 billion through the 13th, with Nubank leading the settlements — an impressive figure, but one that also quantifies the scale of the delinquency problem the program is trying to contain.

Against this backdrop, market deterioration has been direct. The Ibovespa closed Monday's session down 0.27%, at 166,334 points, completing its eleventh consecutive session of losses — the longest negative streak in years. The dollar closed up 0.43%, at R$5.221, pressured by escalating tensions in the Middle East, which pushed oil above US$90 per barrel. Foreign investors made the largest weekly withdrawal from B3 since 2008, as reported by Valor Econômico, in a move that reflects both global risk aversion and the deterioration of the domestic fiscal premium. The Treasury held the largest NTN-B auction since April, selling the entire lot of 1.2 million papers for more than R$5 billion, partly reflecting the record maturity of roughly R$260 billion in those securities the day before — a technical, not structural, relief. Externally, the U.S. 30-year yield reached 5.34%, the highest level since 2007, making U.S. sovereign debt rollover more expensive and contaminating sovereigns from emerging countries, including Brazil.

Fiscal tensions are not confined to the private sector. The Senate approved bills creating special funds for the Federal Justice system and the Federal Public Prosecutor's Office, allowing spending outside the fiscal framework — another hole in the containment ceiling that the government insists on presenting as solid. The approval comes in a week when the Selective Tax — a levy on products harmful to health and the environment, provided for in the tax reform — is expected to have its rates defined by provisional measure, to be sent alongside the 2027 Annual Budget Bill by the 31st. The government is accelerating implementation, but a survey cited by Folha de S.Paulo shows that 24% of companies have yet to simulate the reform's impact on their balance sheets — a planning gap that, in a high-rate environment, could have serious consequences.

Not everything points in the same direction. The digital financial sector shows notable resilience. C6 Bank, which counts JPMorgan Chase as a shareholder, reported net income of R$1.3 billion in the first half, up 20% from the same period in 2025. JP Morgan estimates that Nubank, whose shares trade on the NYSE, could surpass Itaú in retail this year — the fintech's profit already equates to 98% of the retail arm's result at the country's largest private bank. Itaú Unibanco, in turn, received preliminary approval from the Office of the Comptroller of the Currency to operate Itaú Bank in the United States with a national license — a move that signals expansion ambitions even amid an adverse domestic cycle. And JBS, listed on B3 and with ADRs traded in New York, has proposed buying the remaining shares of Pilgrim's Pride, its U.S. chicken subsidiary, in an operation valued at US$1.2 billion — consolidating control of a strategic asset at a juncture in which the Chinese import quota for beef has already been filled, reducing Brazilian export volumes.

On the energy front, Petrobras confirmed the presence of oil at the Morpho well, in the Foz do Amazonas basin, off the coast of Amapá — potentially a new pre-salt, though CEO Magda Chambriard was cautious: "there is oil, but we don't know how much." The Federal Public Prosecutor's Office asked Ibama for clarification on the company's plans to drill three new exploratory wells in the same basin, in a regulatory dispute that could delay the commercial assessment of the discovery. Meanwhile, BNDES disbursed only 11.3% of the R$30 billion earmarked for Move Brasil, a credit program for app drivers, with the deadline expiring on September 15 — the government itself admitted execution failures.

For the week ahead, investors will have to monitor three vectors simultaneously: the Federal Reserve minutes, which could signal the trajectory of U.S. rates and set the appetite for emerging assets; developments in the Casas Bahia judicial reorganization, whose R$1 billion DIP financing — with expected participation from Bradesco and Banco do Brasil — will determine whether the company has runway through 2027; and the progress of Braskem's restructuring, which, with its joint venture in Chapter 11 in the U.S. and a restricted default rating, faces a decisive credibility test with international credit markets.

**JBS (B3: JBSS3 / OTC: JBSAY)** — The company proposed to buy all of the Pilgrim's Pride shares it does not yet own, in an operation valued at US$1.2 billion (roughly R$6.2 billion), consolidating full control of its U.S. chicken subsidiary, which trades on Nasdaq under the ticker PPC. Pilgrim's Pride shares jumped after the announcement, reflecting the premium embedded in the offer.

**Braskem (B3: BRKM5 / NYSE: BAK)** — Fitch downgraded the petrochemical company's rating from "C" to "RD" (restricted default) after the company chose not to pay interest on financial obligations, a deliberate decision to preserve liquidity during restructuring negotiations. On the same day, Braskem Idesa, the company's Mexican joint venture with Grupo Idesa, filed for Chapter 11 in the United States.

**Itaú Unibanco (B3: ITUB4 / NYSE: ITUB)** — Latin America's largest private bank received preliminary approval from the U.S. Office of the Comptroller of the Currency to operate Itaú Bank with an American national banking license, a strategic step that expands its footprint in the North American market beyond existing operations focused on high-net-worth and corporate clients.