Investment to Recover Businesses and Jobs

With vaccinations underway, at least in the wealthiest countries, the expectation now is of a progressive reduction in the mortality rate caused by the Covid-19 tragedy, as well as the resumption of sustained growth to promote employment. The question is the amount of resources that governments and other entities must inject to strengthen companies and stimulate investment.

It is not enough just to invest more; it is also necessary to invest better. The experience with the recovery of companies shows that it is necessary to select in advance viable companies, which have undergone or must undergo a restructuring process, and check whether they are in accordance with the objectives of government policies, to foster employment, innovation and technological development and thus will be prepared to receive an additional injection of resources. All of this in a context of sustainability and healthy corporate governance.

The International Insolvency Institute (III), an international think tank focused on the recovery of companies, has carried out, often in partnership with the IMF, an assessment of the policies and practices adopted in different countries for the financing and recovery of companies or fragile sectors. In the United States, the measures adopted for the recovery of the auto sector after the crisis that mainly affected GM and Chrysler deserve attention. In Japan, the emphasis was on the recovery of small and medium-sized companies, with the creation of several institutes for this purpose.

In Brazil, the preliminary contacts of representatives of the III with Brazilian entities suggest that the leadership of a project of this dimension could naturally fall to BNDES, perhaps in partnership with ABDE, which is the association of state development banks, and SEBRAE. In addition, these three institutions could help channel public and private resources, including from the capital markets and multilateral organizations, to one or some specific funds for the recovery of insolvent companies, in the form that is appropriate to each case.

BNDES, ABDE and SEBRAE have all the conditions to guide the creation or strengthening of funds, including the participation of the private sector and the capital markets. These funds could count on the participation of renowned professionals in the areas of investment, selection of companies and their recovery, with an adequate regional and specialized representation, without excluding the presence of capital holders, whenever they can contribute with knowledge, relationships and even resources. Its management must be private, to give it the necessary agility.

The implementation of a program of this extent will reveal the weaknesses of some aspects of the current insolvency legislation, even after the improvements introduced by the recent Law No. 14,112/20, which could be the subject of an update by Congress, as well as some projects currently under analysis aimed at the recovery of small companies.

The creation of public-private funds, aimed at the uplifting of companies weakened by the crisis, will represent a valuable contribution to the recovery of the economy and the generation of jobs.