In the drought, whoever has structure drinks first. The rest fights over the branch.

The Selic at 14.25% does not create the balance-sheet problems; it merely removes the anesthetic — the closed market is not an anomaly, it is the final exam of decisions made during abundance.

The Selic rate remains at 14.25% per year. The capital market has shrunk, issuances have become rare, and companies that treated liquidity as a permanent service have discovered the service can be canceled. In the drought, whoever has structure drinks first. The rest fights over the branch, offers additional collateral, and calls survival a strategy.

Years of abundant credit teach dangerous habits. Companies finance acquisitions with short debt because rollover seems certain. They use working capital to invest in capacity. They distribute cash and preserve leverage because the cost seemed manageable. The liability becomes part of the landscape, not a decision. When the rate rises and the market closes, the landscape reveals it was an emergency door locked from the outside.

A high Selic affects more than the financial expense. It raises the minimum return investors demand, reduces the present value of projects, shortens the tolerance for error, and turns government bonds into formidable competitors of any private credit. Why take on business risk, illiquidity, and imperfect documentation if the government pays double digits? The company must offer a bigger premium exactly when its capacity to pay it worsens. The price of money rises and the average quality of whoever agrees to pay it also falls.

That is adverse selection at macroeconomic scale. Good borrowers postpone investments, sell assets, or use cash. The most pressured keep seeking funds, accepting rates that can only be paid if an optimistic scenario materializes. The creditor observes strong demand and may confuse it with opportunity. In tightening cycles, the volume that reaches the table contains more desperation than growth. High yield is not generosity; sometimes it is the asset's scream before bankruptcy.

A dry capital market does not mean a total absence of money. It means money demands clarity. In easy times, a known brand, a rating, and a presentation suffice. In the drought, investors ask where the cash is, which asset can be sold, who has priority, and which covenant triggers before terminal deterioration. Credit becomes work again. That is precisely when good structures gain value and decorative structures are exposed.

Companies with granular receivables can finance them separately. Property owners can raise capital against real collateral, provided the asset is unencumbered and enforcement is possible. Exporters can use contracts and revenue currency. Projects can ring-fence flow. Inventory can serve as a base in controllable chains. Each solution demands prior discipline. Whoever waited for the crisis to organize documents will discover that collateral prepared during panic is worth less than collateral prepared during abundance.

The recurring mistake is offering all assets to the first bank. In search of immediate liquidity, the company pledges properties, receivables, and the owners' guarantee to a relatively small line. Later it realizes it destroyed its capacity to finance itself with another creditor. Collateral is not only the lender's protection; it is the borrower's scarce resource. Using it without strategy is selling the future to buy a few weeks.

Good liability management begins before the need. It separates sources by purpose, staggers maturities, preserves free assets, and keeps covenants with headroom. It simulates lower revenue, higher rates, and longer collection periods. It does not ask only whether it can pay in the base case, but what decision it will make if the base case dies. The company that does this work looks conservative during the party and competent after it.

Brazil confuses financial conservatism with lack of ambition. The executive who holds cash is accused of losing returns; the one who leverages is celebrated for efficiency. That lasts until the cost of capital changes. Then cash buys competitors, renegotiates calmly, and preserves control, while the "efficient" company issues shares at the worst price or sells essential assets. Redundancy is expensive until the day it becomes freedom.

My position in 2016 would be to look for creditors, not debtors, but with brutal selectivity. Government bonds set a high bar. To buy private credit, I would demand a premium that compensated for illiquidity, loss, and analytical work. I would not accept a few extra points for a subordinated, unsecured obligation dependent on refinancing. The investor who buys spread without computing recovery is selling insurance without knowing the maximum claim.

In companies, I would look for balance sheets that turned the drought into competitive advantage: net cash or long debt, unencumbered assets, recurring generation, and the capacity to finance clients or suppliers. A company can gain share not only because it sells better, but because it survives while competitors lose working capital. Financial solidity is a call option on other people's fragility.

I would also look for troubled assets where the structure offered control. Discounted debt can be attractive if the creditor holds collateral, priority, and negotiating power. Without that, the discount merely anticipates the loss. In court-supervised restructurings, the difference between holding a right and being able to exercise it is enormous. The promised rate disappears; what remains is the position in the line. I would buy the line, not the promise.

The environment creates room for specialized funds, securitizers, and structurers able to analyze operations standardized banks refuse. But alternative capital must avoid becoming a loan shark in a suit. Charging a company dearly without fixing the mismatch merely postpones the insolvency. Good special credit provides time in exchange for control, collateral, and a verifiable plan. Bad special credit provides money in exchange for hope and a rate that guarantees failure.

There is a mathematical limit to the interest a business can bear. If the company generates a 12% operating return on capital and funds itself at 25%, no managerial skill closes the gap indefinitely. It can sell assets, raise prices, cut inventory, or grow, but the creditor is capturing more value than the asset produces. Credit does not create productivity. Anticipation is not generation.

The drought also exposes the cost of depending on banks as the only source. When everyone uses similar models, they react together. A downgraded sector loses limits at several institutions at the same time. The debtor believes he has diversified because he has five banks; in truth, he has five copies of the same risk committee. Real diversification demands sources with different liabilities and mandates: funds, insurers, suppliers, the capital market, investors, and one's own assets.

The State may try to reopen channels through public banks, guarantees, or directed lines. That helps certain sectors, but it creates a lottery of access. The company should not build its survival on the expectation of qualifying. Credit policy changes with the budget, the government, and the headline. A structure that only works with an official exception is a political structure, not a financial one.

The investor should distrust profits that do not yet reflect the new cost of the liability. Debt can carry grace periods, lagged indexes, and maturities concentrated ahead. The income statement shows the average past; the maturity wall shows the discrete future. A company can look profitable today and be economically insolvent when the next issuance must occur. The calendar is a footnote that should be on the first page.

I would evaluate each debtor with three tests. First, would it survive twelve months without new credit? Second, which asset could it monetize without destroying the operation? Third, who controls the negotiation when the covenant is broken? If the answers are no, none, and the bank, the stock may be an out-of-the-money option disguised as a company. The low multiple does not protect against dilution or loss of control.

For the entrepreneur, the lesson is not to avoid debt. Well-designed debt allows investing without selling equity and aligns the cost with the asset. The lesson is not to confuse availability with adequacy. The money offered in 2013 may mature in 2016. The manager who celebrated the signing may no longer be at the branch. The contract remains. Good cycles sell products; bad cycles enforce clauses.

In the drought, whoever has structure drinks first because the creditor can see the source of payment. Verified receivables are worth more than projections, free collateral is worth more than book equity, and an aligned tenor is worth more than a promotional rate. The rest fights over the branch, where fear is charged wholesale and distributed retail.

The Selic at 14.25% does not create the balance-sheet problems. It merely removes the anesthetic. Companies that took a product thinking they were buying structure discover the difference when they need to renew. The closed market is not an anomaly; it is the final exam of decisions made during abundance. Good debt was designed for this day. Bad debt was merely hoping it would never come.

Leo Bentier