56 The economic crisis in Brazil these last there years has ground business to a halt. It has held back output, eroded investor confidence, cost jobs, increased household debt, reduced consumption and restricted credit. As an obvious consequence, with less to transport and fewer new contracts, sales of heavy vehicles, which includes highway implements, have collapsed by more than 60% over the past two years. In this scorched earth scenario, however, credit consortiums have appeared, helping out manufacturers and customers. On the one hand it enables the industry to preserve some level of production, albeit on a smaller scale in times of reduced demand - and on the other, it provides customers with a financing alternative to renew or increase fleets at more attractive interest rates than available in the financial market. The managing director of Randon Bank, Joarez José Piccinini, says credit consortiums are its main business and, due to some advantages it offers, it is growing year on year. “It is less restrictive. Consortiums suffer less in times of economic upheaval, they are less volatile, and they offer predictability.” Investment strategy Randon’s National Consortium has offered self-financing plans for the road cargo transport segment for over 30 years and, says Augusto Letti, executive manager of Randon Consortiums, its business has grown by 30% since 2010.It manages 4,500 quotas a year on average and last year voided R$ 450 million in credit, stable on 2015, and considered very good, having grown by 20% on 2014.”Transporters have changed and they have come to see credit consortium as an important part of investment strategy for their business.” The growth in the credit consortium segment is based on the fact that the system allows savings for the business - after all, planning is the foundation of success. “Credit consortiums promote the company ‘s growth when the participant is drawn, not to mention that a portion of the asset has already been paid then,” says Letti. “And even if the company does not need to use the letter of credit at the time they are drawn, as happens a lot now, the funds are secured for when needed.” The trend for the government to offer fewer subsidies in official financing programs, such as FINAME, also paves the way for growth in credit consortiums used to buy capital goods. Fernando Ferlini, of Noma’s National Consortium, says current difficulties in obtaining credit have been some of the biggest drivers of the self-financing system. “In general, a consortium plan has an administrative fee of around 13%, plus 1% on the reserve fund. That is, its a loan at 14% spread over the whole plan.” The fact that you cannot get immediate access to the asset - unless you are lucky enough to be drawn first - is the main drawback for credit consortiums. That said, bids can be made to speed things along. “There is no guarantee that a bid will guarantee you a draw - you can always out-bid by someone else in the consortium. But bidding the average amount bid in recent months has paid off for the consortium members,” says Ferlini. Increased demand for credit consortiums has been identified by the Brazilian Association of Consortium Administrators (ABAC), although 2016 did see a slide on 2015 of 5%, to 2.3 million quotas compared with 2.4 million in 2015 and a 3.7% fall in credit, from R$ 40.9 billion to R$ 39.4 billion. However, from 2011 to 2016 the umber of vehicles financed in such a way increased by 6.2%. Credit consortium finance accounted for 4.5% of purchases in 2011, rising to 10.7% in 2016. ABAC says growth was 24.5% in the second half of 2016 on the first half of the year, with 1.27 million quotas, and vehicle plans grew by 41%. “The growth in the second half of the year, despite slump, showed confidence in the system,” says Paulo Roberto Rossi, president of the association. “Planning through a savings system with a defined goal can be the best way to purchase goods or services.” Credit consortiums have been a powerful alternative in corporate investment plans in times of tight credit and economic fluctuations Planning tool FINANCIAMENTOS | FINANCING | FINANCIACIONES © Fabiofersa | Dreamstime.com®
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