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This is what the Consumer Debt and Default Survey (Peic) indicates, released last Wednesday (10) by the National Confederation of Commerce (CNC), which identified the credit card as the main ‘villain’ responsible for the financial weakening of the segment, closely followed by overdrafts, store credit, payroll loans, personal loans, post-dated checks, and car and home installments. Currently, eight out of ten Brazilian families are in debt.
In common, all these credit modalities bear the mark of the monetary tightening perpetrated by the Central Bank (BC), which currently maintains the basic interest rate (Selic) at the Olympic level of 14.50% per year (a real rate of 9.33% per year, the second highest in the world), which, in addition to compromising economic growth, extinguishes jobs and companies.
The ‘podium’ of the ranking of the most used modalities by families is formed by credit cards (84.6%), followed by store credit (16.1%) and personal credit (13.1%). In March of last year, the rate was 77.1%.
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Smaller families suffer the most from debt
The president of the CNC-Sesc-Senac System, José Roberto Tadros, highlighted the fact that “this sequence of increases mainly affects families with lower purchasing power, due to exposure to rates resulting from payment delays. It is necessary to ensure that consumers can renegotiate these debts and regain their financial breath.”
The entity, in a note, points out that “the data reinforces the red alert in the economy due to the fact that the card carries the highest interest rate in the market: 428.3% per year on revolving credit.”
Among the structural causes of the Brazilian financial chaos, the CNC explains that high basic interest rates, in addition to greatly hindering debt settlement and making essential services more expensive, ‘push’ the population to use credit as the only available means to complete the household budget.
Fiscal adjustment is at the root of the expansion of family debts
As the structural problem of fiscal adjustment was not resolved, the federal government now creates a program to finance the debt and default ‘spawned’ by its own monetary policy: through Desenrola 2.0, ‘conditions’ are offered for defaulters to settle their debts contracted until January 2026 and overdue, within a period of 90 days to two years. The ‘formula’ includes credit card debts, overdrafts, and personal credit.
Another ‘kindness’ of the federal program is that it applies discounts, from 30% to 90%, on the principal amount of debts and limits interest to 1.99% per month on them. Workers with income up to five minimum wages will be able to use up to 20% of the FGTS (Guarantee Fund for Length of Service) balance for debt payment purposes.
CNC conditions debt reduction on monetary easing
Despite the federal recognition that ‘the problem requires immediate solution’, the CNC, pragmatic, understands that indebtedness will continue to advance until the ‘effects of monetary easing’ effectively reach the final consumer. However, the perspective is that the conditional balance of public accounts will only occur after the current presidential term, according to the political will of the country’s new administration next year. Finally, the package of federal pretexts for the indefinite postponement of the substantial reduction of the Selic was reinforced by the geopolitical conflict in the Middle East and the resulting rise in oil prices, the largest inflationary vector, here and abroad.
That said, the latest Copom (Monetary Policy Committee) Minutes recommend ‘caution’ when it comes to ‘reducing the Selic’. Caution for the monetary authority, patience for the indebted, is what remains.
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