Brazil intervenes in the credit market, but is it too little, too late?

As part of a long-awaited stimulus package to fight off the economic impacts of the Covid-19 outbreak, the Brazilian Monetary Council (CMN)—the watchdog of the country’s financial system—has announced measures to make it easier for families and companies to renegotiate their debts and allow banks to keep the credit flow steady. The decision, however, comes after tourism firms and airlines warned about systemic bankruptcies in their sectors following havoc on the stock exchange.

On Monday, the Central Bank—one of the institutions represented by the CMN, alongside the Economy and Planning Ministries—waived the need for banks to increase provisions to renegotiate debts over the next 6 months, a decision that may impact loans adding up to BRL 3.2 trillion. It also partially altered the bank’s capital requirements for a year to increase credit concessions by up to BRL 637 billion.

The measure is aligned with Economy Minister Paulo Guedes’ plan to foster credit to help companies in distress—while not using public money in the process.

“When times are good, airlines earn BRL 1, 2, 3 billion. But when times are hard for them, they need public funds? Or maybe they might get a loan for working capital,” Mr. Guedes told...