Business Due Diligence Is More Important Than Ever

A stunning 8.9 million companies in Brazil are now behind on their financial obligations with BRL$210 billion in debt. This alarming figure, recently reported by Serasa Experian, underscores a growing trend of corporate default. Companies large and small are struggling with overdue debts, ranging from unpaid supplier invoices to delinquent bank loans.

A combination of high interest rates, economic uncertainty, and limited access to credit has put pressure on businesses across all sectors. Even well-established companies are finding it increasingly difficult to timely pay their financial obligations. For foreign investors, this is more than just a data point - it’s a warning.

While due diligence has always been a part of doing business in Brazil, it’s now more critical than ever. Before signing any agreement, it’s essential that you investigate who you’re dealing with. That applies whether you’re buying real estate, entering into a joint venture, or engaging a local contractor.

The most important piece of information to start any search is a company’s taxpayer ID number, known as a CNPJ (Cadastro Nacional de Pessoa Jurídica). With this number, lawyers can obtain court records and credit reports, search for pending litigation, and verify any outstanding tax or labor debts.

Given the rising risk of default, skipping due diligence can result in a costly mistake. If you’re planning a business transaction in Brazil, make sure you know the other side’s true financial standing. The time and cost of a proper investigation are minimal compared to the consequences of getting it wrong.