Many Brazilians will end the year in debt or in default: what’s next for them from January?
Brazil closes the year 2022 with some accumulated records in terms of debt and insolvencies and, by all indications, the situation could persist in 2023.
According to the survey on consumer indebtedness and insolvencies (PEIC), carried out by the National Confederation of Commerce of Goods, Services and Tourism (CNC), the share of households with debts, arrears or not, stood at 78.9% in November of this year. The rate is lower than 79.2% in October, but higher than 75.6% in November 2021.
The survey also showed that households in default, ie with debts overdue, amounted to 30.3% in November of this year. The level is the same as the previous month, which was already the highest in the series that started in 2010.
Among defaulters, those who said they were unable to pay their debts jumped from 10.6% to 10.9%.
Among the indebted there are also those families who have requested the payroll loan intended for the beneficiaries of the AuxĂlio Brasil, an income transfer program granted by the federal government.
According to the Ministry of Citizenship, one beneficiary family out of six requested the loan by 1 November: in total, the subsidies were over 3.4 million. The information was obtained from the G1 via the Access to Information Act.
In the paycheck loan, the installments are deducted directly from the paycheck.
But according to the economist of Serasa Experian, Luiz Rabi, the moment is not propitious to take on debts. “Interest is high and rising right now, which means the timing isn’t ideal,” he says.
In addition to high interest rates, high inflation and the exchange rate also make the moment more difficult, explains the expert.
“I see little room to reduce defaults, at least until the end of the first half of 2023,” Rabi predicts.
“The interest rate and inflation may improve in the second half, but until then expectations are not good.”
For those in debt or with overdue mortgage payments, BBC News Brasil has compiled some of the main indicators that are worth observing and making predictions for the year ahead.
Inflation
According to Luiz Rabi, the default scenario in Brazil is mainly explained by the increase in inflation, an indicator that tends to improve by the end of 2023, but which could remain high in the first months of the year.
In March 2022, the country recorded inflation of 1.62%, the highest for this month since the launch of the Real Plan in 1994.
The market expects the HICP to close the year at 5.79%, according to the Focus Bulletin published on 12 December.
As regards 2023, the economists questioned by the Central Bank in the report estimate that the inflation index will close the year at 5.08%.
And the rise in prices has a direct impact on purchasing power, leading many Brazilian families to accumulate debts or leave bills in arrears.
According to a survey conducted by the National Confederation of Shopkeepers (CNDL) and the Credit Protection Service (SPC Brasil) and released at the end of November, the creditor sector that concentrates the majority of debts in the country is that of the banks, with 61 , 34% of the total. Followed by commerce (12.67%), the communications sector (12.67%) and water and electricity, with 10.89% of total debts.
Selic Badger
As inflation rose, the central bank also had to raise interest rates to combat rising prices. “This is the second variable that affects the default,” says the economist of Serasa Experian.
The process of increasing the Selic – which represents the basic interest rate of the Brazilian economy – began in March 2021. Since then the rate has increased from 2% per annum to 13.75%.
And in a scenario of high global inflation and political uncertainties such as the current one, the prospect is that interest rates will not fall anytime soon. “If inflation stabilizes until the second half, it is possible that the interest rate will also be adjusted,” says Rabi.
According to the latest Focus Bulletin, the forecast for the Selic rate at the end of 2023 is 11.75%.
revolving credit card
Even the rates for those who buy on credit show no signs of slowing down.
The interest rate on revolving credit cards ranged from 390.7% annually in September to 399.5% in October, according to data from the Monetary and Credit Statistics Bulletin, released by the Central Bank.
This is the highest since August 2017, when it stood at 428%.
The revolving credit line is the credit line pre-approved on the card and also includes withdrawals made using the credit function of the means of payment.
Without the prospect of a significant decline in the Selic rate in 2023, even economists don’t see much chance of a decline in this rate.
And according to Serasa Experian, the credit card remains the main driver of debt among defaulters.
“In line with the previous year, credit card debts affect 53% of indebted Brazilians,” highlighted a survey by the institute released in October this year.
Exchange rate
According to Luiz Rabi, the dollar exchange rate also has an indirect impact on debt and default rates.
“The exchange rate influences inflation, which affects the consumption power of the population and the interest rate,” he says.
The market forecast is that the dollar will close 2022 at R$5.25, an expectation that remains for the end of 2023 as well.
Work
As regards employment in Brazil, forecasts are for stabilization on the positive rates of recent months.
Unemployment in the third quarter of this year recorded the lowest rate since 2014. According to data from the Continuous National Household Sample Survey (PNAD), from the Brazilian Institute of Geography and Statistics (IBGE), unemployment in the country was 8.3% in the quarter ended last month.
This rate represents a decrease of 0.8 percentage points from the previous quarter (May to July). Compared to the same quarter of 2021, the decline was 3.8 percentage points.
The unemployed population was 9 million people, which represents an 8.7% decrease compared to the quarter ended July. It is the lowest level since July 2015.
Among the discouraged, who are people who would like to work but don’t look for a job because they think they can’t find it, the number reaches 4.2 million people.
The trend reflects the warming of the economy in the first half of 2022, in the post-pandemic period, but according to experts it should slow down between the end of this year and the beginning of 2023.
– This text was published in https://www.bbc.com/portuguese/brasil-64005871
🇧🇷The best content in your email for free. Choose your favorite Terra newsletter. Click here!
Source: Terra
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
