Opinion – Vinicius Torres Freire: How Desenrola, Lula’s plan for debtors can be

Next week, Luiz Inácio Lula da Silva should receive a project from Desenrola, the program whose objective is to reduce the amount of debts of people who are in default, “negative” or, as it was said in incorrect times, “with a dirty name in the square”.

How can it work? It remains to know practical details, still undefined or about which people in the government and banks do not talk.

Will the program allow debtors to renegotiate their debts on their own? It’s not like that.

To understand the gist of the thing, consider the following generic hypothesis. Banks, retailers and water, electricity, telephone or internet companies, for example, have overdue debts receivable from their customers (three-quarters of overdue debts are outside banks, says the government).

Suppose that such companies decide to sell the right to receive these debts. Another institution, a bank, could buy them: it would thus be the new creditor of the indebted person.

As such debts are difficult to receive (there is a high risk of default), the bank only accepts to buy them if there is a discount. Let’s say an electricity company has a receivable overdue debt of $1,000 from a customer. The bank would only agree to buy this debt and stay with this customer, to be its new creditor, if it could pay, say, R$250 to the electricity company, a 75% discount. In this imaginary example, the bank might estimate that it can charge R$300, plus interest, but at its own risk.

Desenrola would be a sales system for millions of debts, in a kind of auction. The discount on the sale of the debt would be entirely passed on to the debtor. It is necessary to give a discount; whoever gives more, does more business.

The Desenrola system would be a “portal” where creditors and banks would negotiate these debts. There, debtors could also express their interest in changing creditors (get a discount). How would you do it? Information is missing.

A large store could sell a bad credit portfolio (a set of debts from its defaulting customers). But how can a debtor citizen express his interest and get his particular debt sold (perhaps debts owed to several companies) in order to “clear his name”? What if the creditor company does not want to sell its credit or the bank does not want to buy it?

What is the advantage of those who buy the debt, banks? Government guarantee. That is, if the debtor fails to pay, a fund with public money covers the default (principal, but not interest). What guarantee fund? It’s still not right.

As the bank has the guarantee that it will be reimbursed for any default on the principal, it can charge lower interest rates. What interest rate? It is not yet known how it will be defined (or this journalist was not told).

What is the total amount of debt that can be negotiated in this auction? It depends on the amount of money in that guarantee fund, which will cover the defaults, and the discounts.

Government economists say the fund cannot have more than R$10 billion. There are people in the government who want R$ 20 billion. Each real of default that comes to be covered by the fund goes into the deficit account and, therefore, into the debt increase.

If the default coverage fund has BRL 10 billion, the total debt that can be purchased will be BRL 10 billion (including the discount). That is, if the general discount is 50%, it is possible to negotiate debts that are currently nominally worth R$ 20 billion.

According to the government, 50 million people have overdue debts worth BRL 60 billion (the total default is over BRL 300 billion). So, “it won’t work for everyone”.

Who could join Desenrolla? Who earns up to two minimum wages, with debts overdue for more than 180 days, totaling up to R$ 5,000 per head. Who knows, micro-enterprises may enter, as well as those who took out a payroll loan within the scope of Auxílio Brasil.

Lula and “politicians” want to include more people (more money would be needed). In addition to this definition, it is necessary to know how the “portal” system will work in practice, with data from debtors and business offers.