Brazil’S Small Industry Faces Confidence Crisis As Demand And Credit Tighten

(MENAFN- The Rio Times) Brazil's small industrial firms face a crisis of confidence as 2025 unfolds, according to the latest data from the Confederação Nacional da Indústria (CNI). The Industrial Entrepreneur Confidence Index (ICEI) dropped to 48 points in April, its lowest since July 2020.

This marks the fifth month below the neutral 50-point line, signaling persistent pessimism among business owners. The survey, which covers 2,500 companies, highlights how high interest rates, a weakening real, and global trade uncertainties are weighing on sentiment.

Manufacturing activity remains fragile. The S&P Global Brazil Manufacturing PMI slipped to 50.3 in April, its lowest since December 2023, indicating near stagnation. New orders declined for the first time in 16 months, while production growth slowed sharply.

Companies reported higher costs and market uncertainty, with many forced to offer discounts to stimulate sales. Labor shortages and shrinking inventories add to the pressure, and firms worry that continued weak demand could push the sector into outright contraction.

Financial health has deteriorated for small manufacturers. The index measuring their financial situation fell to 40.6 in early 2025, reflecting tighter profit margins and more difficulty accessing credit.



Small firms cite high taxes as their top concern, followed closely by insufficient domestic demand and the rising cost or scarcity of raw materials.
Brazil's Industry Faces Headwinds Amid High Rates
In construction, high borrowing costs and weak demand also top the list of challenges, despite government programs aimed at boosting housing and infrastructure.

Regional disparities have grown more pronounced. Industrial confidence fell sharply in Brazil's South and Northeast, while the North and Midwest showed modest optimism.

This uneven landscape complicates efforts to craft effective policy responses. Despite a rebound in agriculture and some resilience in machinery and automotive sectors, the broader outlook remains cautious.

Inflation expectations for 2025 stand at 5.57%, and the central bank's benchmark rate sits at 14.25%, making credit costly. The real continues to weaken against the dollar, further eroding purchasing power.

Business leaders see few easy fixes. As new orders falter and financial pressures mount, small industrial firms must navigate a tough environment. Without a clear rebound in demand or relief from high borrowing costs, confidence is unlikely to recover soon.

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