What is the candidates’ plan for dealing with household debt? See proposals

Brazilian families have never had as much debt as they do now. According to the most recent survey by the CNC (National Confederation of Trade in Goods, Services and Tourism), the level of indebtedness hit a record in August, reaching 79% of households in the country – the highest level since the survey began in 2010.

In an economic scenario marked by high interest rates and rampant inflation, debt ends up becoming another problem: default. Serasa data show that Brazil reached 66.6 million negative names in May, another record.

Whoever is declared the winner of the 2022 elections will assume the presidency with the challenge of improving these two consumption indicators.

In general, candidates commit to proposals to tackle unemployment and loss of income, which in a way touches on the themes. However, of the four best placed in the polls —which together represent about 90% of voting intentions— only Ciro Gomes (PDT) and Luiz Inácio Lula da Silva (PT) make direct mention of household indebtedness in government programs filed in the TSE (Superior Electoral Court).

Lula (PT)

The campaign of former President Lula, in turn, has proposals to renegotiate the debts of families and companies. The government plan filed with the TSE says that the idea is to do this through public banks and incentives for private institutions to offer adequate conditions to debtors.

According to Guilherme Mello, a professor at Unicamp and one of those responsible for the PT’s economic program, the proposal involves two fronts: one for bank debts and another for non-bank debts, which include retail chains, water services, electricity , gas and telephone.

In the case of bank debts, the objective is to encourage institutions to reconsider discounts, terms and costs for payment in modalities such as credit card, overdraft and loans. This would be done by making available part of the compulsory deposits that banks make with the Central Bank.

To face non-bank debts, Lula announced the program “Desenrola, Brasil”, whose proposal is to create conditions for consumers with overdue debts and already included in negative records to renegotiate their debts and clear their names.

A credit guarantee fund would be created to make the renegotiation viable, consisting of a contribution from the government, via budget or debt securities, for example. “I have been saying that it is a kind of public-private partnership. The public sector catalyzes a guarantee fund, and the private sector enters with discounts, installments and lower interest rates for debts”, says Mello.

According to the economist, the idea is to carry out the program in phases, starting with families earning up to three minimum wages and expanding to other income brackets.

Jair Bolsonaro (PL)

President Jair Bolsonaro (PL) has not officially presented a plan to tackle household defaults or debts. According to a member of the campaign, the candidate for reelection does not propose a pardon, discount or refinancing of debts contracted.

The bet would be on a kind of “cycle of prosperity”, which begins with an increase in employment, leading to a heating up of consumption and greater tax collection. Within this model, people would be better able to pay off their debts and less need to contract them.

In addition, Bolsonaro also considers Auxílio Brasil a policy to alleviate indebtedness, given that payment is not cut if the beneficiary finds a formal job — which would then have an “extra income”.

Recently, the president also announced the payroll-deductible loan linked to Auxílio Brasil. However, in the opinion of experts, the offer of credit to low-income and socially vulnerable families has the potential to deepen debts even further.

Ciro Gomes (PDT)

Lula introduced the idea of ​​negotiating family debts with the financial system during an interview with Jornal Nacional on August 25th. At the time, Ciro Gomes accused him of copying a proposal that marked his 2018 campaign, in which he emphasized that he would take the name of Brazilians from Serasa.

The PDT candidate brought the “SPCiro” back into this year’s electoral race, which consists of a government refinancing of debts with lower interest rates and longer payment terms.

Economist Nelson Marconi, coordinator of Ciro’s government program, says that this is not a forgiveness of debtors and points out that, currently, the financial market itself is already renegotiating debts with a discount, that is, for a lower value.

“What we are proposing is that public banks buy this debt in a reverse auction — where the person who sells for a lower value wins —, become the creditor and refinance the debtor’s debt. The difference is the longer term, we are proposing 36 months, and lower interest rates”, he says.

Another proposal by Ciro to face the indebtedness of families is what has been called the “Law of Antiganancia”. The proposal addresses the ban on banks charging more than twice the amount of a loan or a debt on the card or overdraft. In practice, the person who pays the equivalent of twice the amount of the transaction will have his debt settled.

The proposal has been called interest rate fixing, but Marconi says that would only happen if the government set a deadline for payments.

Simone Tebet (MDB)

The MDB candidate makes no mention of family indebtedness in her government plan. Sought to talk about campaign proposals on the subject, Simone Tebet’s advice sent a note with measures that seek to give more security to the financial system and make credit cheaper.

“Political uncertainty and botched interventions demand increases in the Selic and harm the credit market. Therefore, first we need a competent, responsible and serious government”, he says.

The candidate’s advisory also mentions the stimulus to new financial institutions — in order to promote competition and cheaper services — and the creation of an information sharing mechanism so that banks have more detailed data on borrowers.

Another avenue of action is the strengthening of guarantees. According to Tebet’s campaign, enforcing guarantees is still lengthy and expensive, and it is necessary to simplify processes and reduce legal uncertainty.

“This does not mean encouraging the bank to take the asset from a person, from a businessman, but knowing that he is placing this asset as collateral because he has the conditions and intention to repay the loan. This is reflected in a lower interest rate and in more credit”, says the note.