Caixa may have to assume losses with payroll deductible from the Brazil Aid, says Treasury Secretary

An eventual pardon of the debts of low-income families who contracted the Auxílio Brasil payroll loan should be discussed together with Caixa Econômica Federal, one of the main operators of the policy, he tells the Sheet the secretary of the National Treasury, Rogério Ceron.

He does not rule out that the bank itself has to bear the losses, in case the default triggers amid difficulties for beneficiaries to pay the installments.

The credit line was launched by the Jair Bolsonaro (PL) government and implemented by the public bank between the first and second rounds of the elections, despite warnings and criticism from experts about the risk of over-indebtedness of the most vulnerable population. Banco do Brasil refrained from offering the line, as did large private banks.

The president of Caixa, Daniella Marques, is one of the most faithful allies of the now ex-president of the Republic, defeated at the polls by Luiz Inácio Lula da Silva (PT). She is still in office, as the succession in charge of the bank awaits bureaucratic procedures.

One in six beneficiaries of the Brazil Aid and the BPC (Continued Provision Benefit) contracted the payroll loan, totaling R$ 9.5 billion in disbursements up to November 1, in the middle of the election period. The recommendation of the transition technical group was to suspend the modality.

The Minister of Development and Social Assistance, Family and Fight against Hunger, Wellington Dias, told the newspaper O Estado de S. Paulo that there is a proposal under study by the government to grant amnesty to those indebted for the Auxílio Brasil payroll deduction. He did not make it clear, however, whether this would fall on the bank’s coffers or, more directly, on the Union.

Ceron says that the discussion has not yet reached the National Treasury, but he says he is against the policy of payroll loans for families of the Auxílio Brasil. He defends analyzing which families will not be able to honor the commitments and discuss a solution with Caixa, as it is the bank that most adhered to the modality. “There is a discussion with the financial institution itself, which supported this policy”, he says.

Questioned whether the loss could stay with Caixa, he says that “it is a possibility”. “This is what happens in a normal financial transaction.”

He points out, however, that not all R$ 9.5 billion should be lost. For the secretary, it is necessary to have a technical analysis of the theme, involving even control bodies to detect the conditions for formulating the policy.

In justifying his position, Ceron assesses that the social program is designed to ensure a survival income for families, and the possibility of contracting financing with a discount on these installments creates “an inescapable future problem”.

“It is obvious that a family in a situation of extreme poverty, with a small child, who needs to buy medicine, food, subsistence things, if they have the opportunity to access the resource quickly, they will do it and then look for how to solve it. But this then ends up turning into a snowball”, he says. “I find it very difficult, as a coach, to understand the merits of this policy.”

After the repercussions on the possible amnesty, Wellington Dias said that the government should include the cases of these families in the Desenrola Brasil program, a campaign promise to help renegotiate the debts of up to 80 million people who are in default in the country.

The proposal has not yet been formally presented by the new government. In the sketch made during the campaign, the focus would be on renegotiating debts such as electricity, water and food bills. The audience would be families earning up to three minimum wages.

The operation provides for a guarantee fund, which would serve as ballast for renegotiations. This type of fund usually pays the installments in case of default, reducing the risk of those who finance it — therefore, the effect is a lower interest rate.

“As soon as the project is ready, President Lula will certainly launch it.

The risk of over-indebtedness of low-income families due to the Auxílio Brasil payroll was the target of a warning in a document drawn up by a committee of employees and former directors of Caixa and sent to Lula on November 30.

In the report, the group also suggested reviewing the interest rate applied on contracts already signed, matching the lowest payroll loan offered by the bank.

At Caixa, the rate charged is 3.45% per month, slightly lower than the ceiling of 3.5% per month set by the Ministry of Citizenship. However, the interest charged from Auxílio Brasil beneficiaries is higher than the payroll for INSS (National Social Security Institute) retirees and pensioners, up to 2.14% per month.

The Ministry of Citizenship regulation also stipulates that borrowers have up to two years, in 24 monthly and successive installments, to complete the payment of the debt. If the beneficiary loses the right to the Brazil Aid and the loan has not yet been paid off, the debt remains.

Caixa’s motivation for offering this line of credit was even questioned by the Public Prosecutor’s Office at the TCU (Union Court of Auditors), which presented a new request at the end of November for the court to assess the matter, given the bank’s decision to restrict access to the Auxílio Brasil payroll after the elections.

In a note released at the time, Caixa said it reiterated the “technical nature, as well as the regularity of the payroll in the Auxílio Brasil”. “The bank points out that the credit operation was created by law and that the TCU’s technical area has been monitoring the case since October, without having identified any irregularity promoted by Caixa.”