A Brazilian federal government program to help families renegotiate their debts will begin to show its first effects today. A campaign promise by President Luiz Inácio Lula da Silva, the government enacted the Desenrola program by way of a provisional decree early in June.
Provisional decrees have immediate effect, but they expire if they are not approved by Congress in up to 120 days (in which case the president cannot issue a similar decree in the same legislative semester). Congress is currently in its mid-year recess until August and has yet to begin its analysis of Desenrola.
Financial data shows that families are struggling to make ends meet, which is particularly dangerous given that borrowing costs have remained elevated for months. Between March 2021 and August 2022, the Brazilian Central Bank implemented one of the most aggressive monetary tightening policies in the world, hoping to bring inflation to heel.
Consumer prices have finally cooled back to the inflation target, and markets overwhelmingly expect an interest rate cut in August — but the policy rate is likely to remain in double digits well into 2024.
A monthly survey of family debt by the National Confederation of Commerce (CNC) shows that three-quarters of Brazilian households are in debt. Meanwhile, 23 percent are in default and nearly 10 percent are unable to pay at all.
Debt is not bad by definition, as...
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