High Interest Rates Push Brazilian Companies Toward Financial Crisis and Record Bankruptcies

Brazilian enterprises are facing a period of financial pressure, driven by a combination of elevated benchmark interest rates, tight credit availability, and increased indebtedness. According to data from Serasa Experian cited by CNN Brasil, a total of 2,466 companies filed for judicial reorganization over the course of the last year to restructure their accounts, reaching record levels in 2025.

The central driver behind this corporate distress is the Selic rate, which remained parked at 15% per year during a good part of last year, marking its highest level in nearly two decades. Companies that expanded their borrowing during earlier periods of low interest rates now find themselves grappling with unsustainable financial leverage as debt servicing costs outpace incoming cash flows.

This macro-financial squeeze affects small businesses. Between the start of 2025 and July, Serasa Experian data indicates that 8 million corporate tax registries (CNPJs) in Brazil were flagged with negative credit statuses, logging an increase of 200 thousand businesses month-over-month. As borrowing costs filter through the economy, analysts point to structural vulnerabilities in how different market tiers access capital.

Rising Debt Loads and Structural Credit Pressures

The scale of corporate indebtedness is visible across Brazil’s public markets. Data compiled by Einar Rivero, CEO of Elos Ayta consultancy and reported by CNN Brasil, shows that the combined debt of 248 publicly traded companies surged from R$ 1,4 trilhão em 2020 to R$ 2,3 trilhões em 2025. Even when excluding Petrobras, the total debt for remaining listed firms climbs to R$ 1,9 trilhão, underscoring a sharp five-year upward trajectory.

Alex Agostini, chief economist at Austin Rating, explained to CNN Brasil that the transmission mechanism of high interest rates operates primarily through the rising cost of credit required to fund operations. When borrowing costs rise, final operational expenses expand, and companies frequently struggle to pass those financial burdens along to end consumers.

Felipe Granito, a partner at Granito Boneli Advogados and a specialist in corporate restructuring, noted to CNN Brasil that smaller enterprises face severe hurdles because they lack access to alternative funding channels, such as private debt issuance or capital markets. Restricted entirely to traditional bank loans, which feature shorter maturities and higher interest rates, small businesses have limited breathing room when cash reserves tighten.

Sector Impacts and the Road Ahead for Small Businesses

Judicial reorganizations have not been distributed evenly across the economy. Serasa Experian data highlights that the agricultural sector concentrated the largest share of restructuring requests in 2025 at 30.1%—equivalent to 743 companies—marking a 3.8 percentage point increase compared to 2024. Retail and service sectors faced similar strains, squeezed between high borrowing expenses and consumers possessing diminished purchasing power.

For smaller firms, formal legal mechanisms like judicial reorganization can carry prohibitive practical risks. Granito explained to CNN Brasil that filing for restructuring often triggers an immediate cutoff of commercial credit from suppliers and financial institutions, frequently forcing operations to halt entirely.

Addressing these structural vulnerabilities requires targeted changes. Agostini emphasized to CNN Brasil that small and medium-sized enterprises must enhance their corporate governance standards to successfully tap capital markets as an alternative to traditional bank credit. Meanwhile, economists note that even as monetary authorities begin easing cycles, the lagged transmission of monetary policy means relief for corporate balance sheets will take time to materialize fully.