Development: 1.5 million will have a clean name on Monday – 07/13/2023 – Market

Desenrola Brasil will go into operation next Monday (17th), when 1.5 million Brazilians who owe up to R$100 will be removed from the negative list and citizens with incomes of up to R$20,000 will be able to renegotiate their debts directly with Financial Institution.

The kick-off of the program will be given with the publication of an ordinance in the Official Gazette this Friday (14).

The five largest banks in the country –Bradesco, Banco do Brasil, Itaú Unibanco, Caixa Econômica and Santander– have already announced that they will join Desenrola.

Debts registered until December 31, 2022 may be renegotiated, and the debtor will have a minimum period of 12 months to settle the debts. In order not to encourage default, the Ministry of Finance chose a cut-off date prior to the announcement of the plan.

According to the Ministry’s Secretary of Economic Reforms, Marcos Barbosa Pinto, the initial stage of the program has two direct effects on the economy.

“First, all people, when renegotiating their debts, leave the default records and can have credit again. On the other hand, banks, regardless of the first measure, have R$ 50 billion more to lend to the population”, affirm.

Isaac Sidney, president of Febraban (Brazilian Federation of Banks), says he believes that, through Desenrola, credit can “be granted with responsibility and within the needs of borrowers.”

“For both band 1 and band 2, when they start operating, the banks will make their contribution so that Desenrola reduces the number of negative consumers and helps millions of citizens to reduce their indebtedness”, he says.

At this stage of the plan, the banks will not have the guarantee of the FGO (Fundo Garantidor de Operações) to renegotiate the debts of defaulters, but will have a regulatory incentive already used on other occasions, as in the Covid-19 pandemic.

Financial institutions that negotiate bank debts on Desenrola will be entitled to a presumed credit that, in practice, improves the bank’s capital position and opens up space to boost new financing. The government estimates that around BRL 50 billion could be traded in this context, benefiting around 30 million people.

“The Central Bank itself estimated the fiscal risk, the fiscal impact of this measure, as irrelevant, because the credit is on the banks’ balance sheets and it could only be used if the bank went bankrupt”, says the secretary.

“On the other hand, by making room on the balance sheet, the bank’s taxation increases as well. It pays tax on that amount. So, the two net things tell us that the tax impact is irrelevant”, he adds.

In the case of Brazilians with a bad name due to debts of up to R$100, the economic team sees the potential to reach up to 1.7 million people if other financial institutions join the program.

Although the banks cannot “forgive” the debt, they commit to no longer actively collecting it. Removing the negative ratings for these debtors is a counterpart required by the government for financial institutions to participate in the credit auction (for example, bank debts, debts for basic services and company debts), scheduled for August.

Only the winners of the auction, that is, the creditors who offer the greatest discounts, will be able to participate in the last stage of the Desenrola project, which will target people who receive up to two minimum wages (R$ 2,640 per month) and have debts of up to R$ 5,000 or are enrolled in the Single Registry of social programs.

This group, which comprises approximately 40 million people with an average debt of R$1,200, must carry out all negotiations through a platform to be made available in September within the scope of the program. To avoid fraud, access will be made through the gov.br account.

If the debtor has proposals for his debt, he will have two options: pay in cash or finance the already reduced amount in up to 60 months, with interest of up to 1.99% per month. When choosing the financing option, the citizen will be able to choose the most attractive offer among the banks. He is not obliged to renegotiate all his eligible debts, but he is only entitled to choose one institution in this process.

The Treasury believes that giving the debtor the possibility to choose the bank through which he wants to pay his debt will generate competition among financial institutions for payments.

At this stage, the FGO will have R$ 8 billion to guarantee financing contracted by people in the so-called “tier 1”. In it, financing of rural credit debts, real estate financing, credits with real guarantee and operations with third-party funding or risk, among others, is not allowed.

Pinto points out that, although the next stage has greater scope and the possibility of better discounts, there is no 100% guarantee of offer for the consumer.

“The platform covers debts other than banking, it is much broader. Much of what hurts the consumer’s pocket and most of the negatives are outside the banking system”, he says.

“There will be many discount offers, but the refinancing guarantee will depend on the auction. The creditor may not win the auction and the person will be left out”, he warns. “If the renegotiation that the bank is offering is good, I would suggest that it be done now. It is changing the right for the doubtful a little later.”

---

HOW DEVELOPMENT WORKS

Who can benefit from Monday?
At this stage, 1.5 million Brazilians with debts of up to R$100 will be removed from the negative list and will be able to regain access to credit lines. The renegotiation of debts is intended for people with a monthly income of up to R$ 20,000 and will be done voluntarily directly with financial institutions. In this range, the debtor will have a minimum period of 12 months to pay debts registered until December 31, 2022.

What are the next steps?
In August, an auction will be held by credit category (for example: bank debts, basic service debts and company debts). The winner will be the creditor that offers the highest discount for the debt to be renegotiated. As of September, the debt will be renegotiated between the debtor and the bank chosen by the defaulting person.

Who will be considered in the next stage of the program?
As of September, people who receive up to two minimum wages (R$ 2,640 monthly) and have debts of up to R$ 5,000 or are enrolled in the Single Registry of social programs can renegotiate their debts through a digital platform. At this stage, debtors will be able to renegotiate debts with banks, retailers, water, electricity and telephone companies. Citizens will have two options: pay the reduced amount in cash or finance it in up to 60 months, with an interest rate of up to 1.99% per month.

What debts cannot be negotiated?
Financing of rural credit debts, real estate financing, credits with real guarantee and operations with third-party funding or risk is not allowed.

How many people and what total value does the government calculate in renegotiations?
The government estimates that around BRL 50 billion can be traded freely between debtors and financial institutions, benefiting around 30 million people as of this second. The renegotiation made exclusively on the digital platform should benefit around 40 million people. The total amount of impact in this range will depend on the discounts that will be offered by banks to defaulters.