Government evaluates using resources from Pronampe guarantees to reduce the impact of Desenrola – 02/13/2023 – Market

The government is considering redirecting resources from its FGO (Operations Guarantee Fund) currently earmarked to cover financing from Pronampe, aimed at small and medium-sized companies, to make Desenrola, a program for renegotiating family debts, sources in different areas told Reuters. inside and outside government.

The use of money already present in the FGO’s cash would reduce the budgetary cost of the new initiative, which was a campaign promise of President Luiz Inácio Lula da Silva, but may run into pressure from sectors that defend the maintenance of Pronampe.

The government’s plan is to launch Desenrola later this month. The idea, according to the authority and a source in the financial sector accompanying the negotiations, is that the program offers a government guarantee for the renegotiation of debts of people with incomes of up to two minimum wages, in an operation that may involve R$ 120 billion in debts.

According to the member of the government who participates in the preparation of Desenrola, a conservative projection foresees a need for R$ 20 billion in guarantees for operations. Other more optimistic scenarios were designed, which predict higher discount rates on debts and lower default rates, with the cost falling to R$5 billion.

The Ministry of Development, Industry, Commerce and Services (MDIC) informed Reuters that the FGO currently has R$ 9.6 billion available for new hires.

The fund’s resources are currently used to guarantee operations of Pronampe (National Support Program for Microenterprises and Small Businesses), which was created as an instrument to help companies during the Covid-19 pandemic, but ended up being extended in the management of the then President Jair Bolsonaro.

The government is now studying the possibility of redirecting part of the fund’s resources.

According to a government source, the purpose of creating Pronampe, which was to support small and medium-sized companies during the pandemic, has already lost “a little” of its meaning, and there are discussions about the migration of resources.

FISCAL IMPACT

Transfers from the Budget to the FGO generate a fiscal impact, worsening the primary result for the year. Therefore, in practice, the more the government manages to take advantage of resources already available in the fund’s cash for Desenrola, the less the need for new contributions from the Treasury to provide guarantees for the program.

According to the MDIC, considering the current average of Pronampe concessions, the BRL 9.6 billion available in the fund would run out in about a year and two months. The folder confirmed that it is possible that free funds from the FGO be used as a guarantee in Desenrola “if there is a legal provision”.

The private sector source says banks are still learning about the program to assess its viability. A point considered positive by the sector is that once the debt of this group of people is resolved, they will be able to return to the credit market, opening up new possibilities of services to banks.

Data from Serasa indicate that 69 million Brazilians are in default, with overdue debts in the total amount of R$ 301.5 billion. On average, each defaulting person owes R$4,400.

The program, said this source, should cover bank and non-bank debts, such as outstanding debts with retailers and electricity and telephone companies.

The base scenario of Desenrola, built by the Ministry of Finance, estimates that institutions will offer a discount of approximately 70% of the total value of renegotiated debts. A person who owes BRL 1,000, for example, would have the right to settle his debt with the payment of BRL 300, if this scenario is confirmed.

According to the government source, there is an expectation of renegotiation of R$ 120 billion in debts of these people with income of up to two minimum wages. With the estimated discount, the amount to be paid by these debtors after the renegotiation would be close to R$40 billion.

From this value, the government tries to estimate a possible default rate. According to the source, Banco do Brasil suggested that a conservative calculation would be 50% default, which would lead to a maximum need of R$ 20 billion in guarantees.

This amount may be lower if negotiations with financial institutions are more aggressive, allowing discounts greater than 70% on debts, and if effective default is lower.

Considered successful during the pandemic, Pronampe became permanent after Congressional decision. The release of Treasury resources to implement the guarantees was crucial to make the program viable, since the instrument covers possible loan defaults, which reduces the risk for banks.

The coordinator of Access to Credit and Investments Sebrae (Brazilian Micro and Small Business Support Service), Giovanni Beviláqua, assessed that Desenrola is an important program, but highlighted that Pronampe continues to depend on guarantees from the FGO.

According to him, the reduction in the flow of loans in Pronampe is a reflection of the high Selic, which references the operations, and the indebtedness of the companies.

“These two factors help to explain the reduction in the number of credit operations, but we cannot say, due to the drop in the number of operations or the amounts granted, that the need for loans has been reduced”, he said.

When contacted, the Ministry of Finance reported that Desenrola is in the final stages of formulation and that more information will be provided soon. FGO manager, Banco do Brasil said it would not comment because it is in the quiet period that precedes the disclosure of its financial results.