Increase in Judicial Recovery Requests Attributed to Interest Rates and Defaults
the number of requests for judicial recovery increased considerably compared to the previous year. There were around 70% more, the fourth highest number since 2005, the year in which Law No. 11,101 was created, which regulates judicial recovery.
In addition to presenting high numbers, another factor that drew attention was that large companies such as Oi, Gol and Americanas requested the process. The economist and professor at the Faculty of Economics and Administration of Ribeirão Preto (FEA-RP) at USP, Edgard Merlo, explains that the judicial recovery is a “confirmation of the company’s inability to pay its commitments in relation to its debts”. Therefore, this act aims to maintain the productive activity of companies and allow them to resume activities, in addition to preventing them from closing their doors due to debt.
The year 2023 was the first year after the pandemic, but its effects continue to be felt in the economy, especially in the services sector, the main responsible for requests for judicial recovery, with 651 requests in total. “People stopped doing many activities in person. As a result, many companies were forced to reposition themselves, consequently generating an increase in debt”, points out Merlo.
Reasons for the increase
For Serasa Experian economist Luiz Rabi, one factor that explains the increase in requests for judicial recovery is interest rates, which remained high for much of the year. “ Interest rates remained high last year, although they began to fall very slowly in August. We are also not in a low interest rate environment, so there was no time for the interest rate reduction to change this scenario”, says Rab i.
Second variable that justifies the high number of requests for judicial recovery, the default rate; According to Rabi, 72 million people were found to be in default, that is, around 44% of the country’s adult population, which harms the financial health of companies. “On the other side of the counter is someone who is not receiving money from the sale or from that service that was offered, or even that credit that was granted. Therefore, when the consumer is in default, companies begin to have financial difficulties, because they stop receiving what they delivered”, analyzes Rabi.
The lowest number since 2020, at 4.62%, inflation does not directly influence legal issues, as it has a greater influence on the consumer, and therefore ends up being a variable that does not justify the large number of judicial recoveries. “Inflation practically does not affect the issue of judicial reflections, it affects the consumer’s pocket, so inflation, in this process, has no influence”, confirms Rabi.
Recovery Time
Regarding the future of these companies, Rabi says that judicial recovery depends on other variables so that there is a prospect of improvement in numbers. “Judicial recovery is a variable that we call a lagged variable, that is, it depends on the improvement of others that precede its movement. Currently, interest rates and default rates are already falling and the economy is growing a little, so, added to the prospects of improving interest rates for the year 2024, the number of recovery requests tends to decrease or remain stable”.
From the beginning of the recovery act until the moment the company organizes a plan that allows the adjustment between debts and income to maintain viability, the average time has varied from six months to two years, according to Merlo.
Company data
Of the 1,405 requests for judicial recovery last year, 939 were from small companies, 331 were from medium-sized companies and 135 were from large companies. Therefore, micro and small companies were the majority, with around 67% of the processes. This is justified, according to Rabi, because they are more vulnerable, more fragile and because they are the majority, explains the economist. “According to research by the Brazilian Micro and Small Business Support Service (Sebrae), around 90% of companies in Brazil are micro-enterprises.”