Fitch LatAm Corporate FX Risk: Brazil Benefits from Natural Hedges and Derivatives
OREANDA-NEWS. Despite a 61% exposure to U.S.-dollar-denominated debt, Brazilian corporates are well positioned with natural hedges and derivative contracts to withstand foreign exchange risk, according to the latest report in Fitch Ratings' six-report series on LatAm Corporate FX Risk.
Reports will be released daily through April. 22nd as per the schedule found at the end of this release.
"Almost half of Brazilian issuers with high levels of USD-denominated debt benefit from a natural FX hedge due to their positions as net exporters or product prices linked to international markets," said Jay Djemal, Director. "Brazilian corporates use hedging instruments more frequently than Latin American peers, with 31% using derivatives to various extents to protect against FX volatility."
Three-quarters of the companies reviewed exhibit relatively neutral FX volatility under a depreciating BRL scenario of 10% in 2016, with less than 0.2x change in net leverage ratios.
Four issuers with more than 20% exposure to USD-denominated debt which is not offset by hard currency cash flow include GOL Linhas Aereas Inteligentes S.A., General Shopping S.A., Centrais Eletricas Brasileiras S.A., and Usinas Siderurgicas de Minas Gerais S.A.
The LatAm Corporate FX Risk series will be released as follows:
April 18th: Brazilian Corporate FX Risk - Prevalence of Natural Hedges and Derivatives
April 19th: Chilean Corporate FX Risk - Depreciation Impact Positively Skewed
April 20th: Colombian Corporate FX Risk - Losers Outweigh Winners
April 21st: Mexican Corporate FX Risk - Highly Exposed to Currency Weakness
April 22nd: Peruvian Corporate FX Risk - Portfolio Positioned to Benefit from Currency Depreciation
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