By Marcela Ayres and Bernardo Caram
Brazil's government on Monday unveiled another initiative aimed at renegotiating consumer debt, this time targeting borrowers who are up to date on their payments, as President Luiz Inacio Lula da Silva moves closer to a re-election bid in October.
The program aims to ease the burden on households that devote a significant share of their income to servicing debt, allowing them to swap more expensive credit for cheaper loans. The plan will rely on federal government resources to guarantee the refinancing operations.
For individuals with no overdue debts or with debts overdue by up to 90 days, the government will offer guarantees for refinancing debts of up to 15,000 reais ($2,900) per financial institution. The refinanced debt will have interest capped at 1.99% per month, and the repayment term may be extended.
In early May, the government announced a similar program focused on delinquent borrowers, covering those earning up to five times the minimum wage, a substantially higher threshold than the cap of two times the minimum wage in the program's first edition in 2023.
Lula's leftist administration has also rolled out a series of other measures, including subsidized credit for purchases of trucks, cars and motorcycles by app-based delivery workers. Lula is seeking a fourth non-consecutive term as president.
Several economists have criticized the moves, arguing they will boost demand at a time when the central bank is still maintaining a tight monetary policy to cool the economy and bring inflation back to its 3% target. Consumer prices are currently running at around 4.8% over a 12-month period.
After cutting its key interest rate by 25 basis points earlier this month to 14.25%, central bank policymakers for the first time flagged such stimulus measures as upward risks to inflation, in what they now describe as an asymmetrically tilted balance of risks.
($1 = 5.1746 reais)