It is rare to link crises to something positive, but quite a few artists and economists out there would consider it possible. For example, in the same way that singer Bob Dylan released his excellent album ‘Blood on the Tracks’ in 1975 amid the crisis of his marriage, and Lena Dunham has written her highly-acclaimed series – ‘Girls’ ( 2012 to present) while experiencing a generation crisis, an economic crisis in a country could mean an investment with an excellent rate of return for those entrepreneurs who have good advisors.
In Brazil, an investment tool is known as Direct Treasury (Tesouro Direto) is one of the examples that can show how an economic crisis could be fruitful. The investment allows individuals to buy Government public bonds, thus becoming a kind of creditor of the country. The recession is an excellent opportunity for investing in post-fixed bonds. These bonds follow the benchmark base interest rate (Selic) which stands currently at 14.25% per annum and investors are recommended to obtain a short-term return (maximum of two years).
Again, when there is an economic crisis, the commercial sector tends to recover, this being an area mostly left aside in the days of the economic boom. In times of recession, some of the habits such as alteration of clothing, repair of domestic appliances; and purchase of second-hand cars and bicycles return. Apart from granting higher value to manual labour, this also contributes to a more conscientious style of consumption, thereby giving a new investment possibility for small businesses.
For investors who are willing to run great risks to obtain a quick and high return on investment, there is no scenario more favourable than a moment of economic slowdown. It is mainly in this context that the operations known as ‘Distressed M&A’ are carried out, seeking to acquire companies, or assets from companies, which are going through economic hardship. Benefiting from the Brazilian Bankruptcy Law of 2005, these transactions mean that investors buy assets for their real market value, without the need to take on further debt, and these sales can be highly profitable.
Domestic business owners are the other group of people that will be benefited during an economic crisis. An increase in the exchange rate for the United States Dollar means it is hard to import goods, which in turn allows domestic producers to establish business relationships with new companies and boost sales. An economic downturn tends to strengthen Brazilian brands that, indeed, could tap into the export market. Moreover, the fall of the Brazilian Real is also a major factor that attracts foreign consumers.