The global economic scenario has been marked by turbulence since 2023. Several events, such as crises in the credit market, the slowdown in inflation and the delay in reducing basic interest rates, impacted expectations and speculation in local and global economies.
Faced with these challenges, growth and financing strategies require review and adaptation. To better understand this context and find out how companies can chart a safe path amid an uncertain outlook, Portal Visão spoke with André Tavares, CFO of Softplan.
He shared his perspectives on the impact of economic turmoil and offered insights for businesses looking to thrive amid market volatility.
Persistent inflation and geopolitical uncertainties impact global economic growth
The year 2024 presents a challenging global economic panorama, marked by slowing growth, persistent inflation and geopolitical uncertainties. The IMF (International Monetary Fund) projections, published in the report World Economic Outlook (WEO), indicate that, despite the resilience observed to date, the global economy faces significant risks.
In the geopolitical scenario, conflicts in the Middle East and the war between Russia and Ukraine intensify uncertainties, impacting the global context, as André highlights: “We still don't have a full understanding of whether these conflicts will weaken or worsen. In any case, they continue to influence economic flows, energy generation and energy prices. commodities like oil.”
For the CFO of Softplan, these wars have direct implications on global markets, affecting not only the economies directly involved, but creating waves of impact throughout the international economic system. “Increased geopolitical tensions could lead to significant changes in investments and economic policies in different regions”, he comments.
World Bank data reveal that trade growth in 2023 was the slowest in half a century, excluding periods of recession. This performance reflects the contraction in merchandise trade, with global industrial production also showing weakness.
Although there are optimistic projections for 2024, with a expectation of global trade growth of around 2,3%, experts highlight that this recovery is still modest. This perspective gains relevance to thesiderWe believe that, after a global recession, the recovery period between 2021 and 2024 is seen as the weakest in decades.
Reflections of the economic dynamics of great powers
In addition to geopolitical issues, André also highlights the economic scenario in the United States and its ripple effect: “In the United States, we have a very persistent inflation scenario. The American Central Bank had to increase interest rates, which is a significant change compared to recent years. This directly influences investments, especially in companies, startups and innovation projects.”
The World Bank's outlook is for US growth to slow to 1,6% this year, with a reduction in savings and still high interest rates. Labor shortages and economic and political uncertainties are also expected to affect business investment.
André explains that “the rise in interest rates in the US has a global impact, affecting the domestic investment environment and influencing the decisions of investors and companies around the world”. For him, the difficulty in accessing capital at lower rates can restrict economic growth and innovation in several sectors.
He highlights the interconnection between the global and Brazilian economies: “If the American interest rate does not fall, the Brazilian interest rate cannot fall either, due to the interest rate differential between the economies. This is reflected in companies and harms the investment environment, resulting in fewer projects and financing.”
Technology remains attractive for investments, but it is important to evaluate case by case
When discussing investment opportunities, André emphasizes the importance of evaluating not only specific sectors, but the individual characteristics of companies.
He highlights that “companies with high debt represent a greater risk in periods of less economic dynamism, where a significant portion of their results are directed to interest payments”. On the other hand, he explains that businesses that generate cash and maintain low debt are seen as interesting opportunities.
In this context, André notes that some sectors, such as healthcare, face significant growth challenges due to high debt. “Operators, health plans, insurance companies and hospitals are among the companies facing these difficulties,” he says.
However, he highlights the technology sector, especially software companies, as one of the most promising. “Companies in general are going through a digital transformation intense, reflecting a global trend towards digitalization, which has positively impacted its growth and cash generation potential”, he explains.
For him, software companies that generate cash and that can show good growth rates are the best investments today.
However, he warns that It is essential to distinguish between technology companies that grow and generate cash from those that, despite growing rapidly, consume more resources. This latter group will face additional challenges due to the increasingly tight financing environment.
Artificial intelligence continues to rise
Another point raised by André is that we are living in a tree significant in the area of artificial intelligence — in his words, “a moment of euphoria when everyone is watching the impact that AI will have on business.”
A data collected by the Sling Hub contextualizes this scenario. According to the data intelligence platform, in the first half of this year alone, Brazilian startups with AI in their solutions raised more than US$110 million in investments.
André notes that AI companies are growing impressively, but warns about the possibility that we are in a phase of high speculative growth, where these businesses may be overvalued. “Although it is a strong growth scenario, this may not be the best time to invest in this sector due to the potential bubble”, he warns.
Furthermore, he highlights the transformation of the job market driven by AI, highlighting the increase in home working and the fluidity in work relationships. André sees these changes not just as trends, but as realities that will continue to bring significant transformations to the world stage.
This moment requires caution and strategic planning from companies
This context, marked by high interest rates and a retraction in economic activity, requires caution and strategic planning from companies, especially for those that are in debt, as André warns.
For him, in a moment of instability, Efficient cash management becomes crucial for the company's survival. “Generally, managers are looking too much at accounting results, such as EBITDA, and forget about cash management. Prioritizing cash flow guarantees the necessary liquidity to honor commitments and avoid collapse”, he explains.
André reinforces that debt, although undesirable, is a reality for many companies. He emphasizes that the key to dealing with this situation lies in strategic debt management. “If you are in debt, it is time to look inside the company, see what opportunities there are for extracting and generating internal value so that you can reduce the level of leverage”, he advises.
Another point raised by André is that for companies with good financial health, the moment may present unique investment opportunities. “If you are a company that is growing, that is well capitalized, I would say that this is the time to look at good investment opportunities”, he advises.
He adds that “strategic acquisitions at advantageous prices can drive growth and strengthen market position.”
According to André, the current economic context, although challenging, also offers opportunities for companies that prove resilient and adaptable. “There is no prospect in the short and medium term for interest rates to reduce much. So, companies that know how to navigate this crisis with intelligence and strategic planning will emerge stronger and ready to prosper in the future”, he concludes.
Asked about the outlook for the coming months, André predicts the continuation of a challenging scenario, characterized by high interest rates and economic difficulties. He also points to the importance of closely monitoring developments in 2024, including events such as the United States election, which could significantly impact economic and investment decisions.
“Although uncertainties persist, there is hope that the global scenario may improve as certain risk factors, such as international conflicts, dissipate, allowing for a stronger recovery and renewed opportunities for investors”, he adds.