Desenrola programme ends below potential

The Treasury says the result was ‘great’; in the market, however, the impression is that the programme has not reached its potential.

The Desenrola Brasil programme ended Monday with results below potential, although the figures are considered significant by the Ministry of Finance and analysts. Updated figures show that almost 15 million people benefited from the renegotiation of R$52.42 billion in debts in all phases of the programme.

The potential was to reach around 30 million just in the phase with a guarantee from the National Treasury, considered a priority by the government, in which around 5 million consumers took part.

Targeted by the initiative, the ‘negative’ public remained at around 70 million, but the economic team and experts believe that the programme has halted the worsening in general default. In terms of bank debts, the percentage of arrears of more than 90 days fell by 1 percentage point for those earning up to two minimum salaries – compared to a fall of 0.4 percentage points for the average individual, between July 2023 and February.

The Ministry of Finance argues that the programme had ‘great’ results, especially considering the low commitment of public money. In the market, however, the impression is that it didn’t reach its potential, especially the part aimed at the low-income population, with a Treasury guarantee, where debts had an average discount of 83 per cent.

Campaign promise

Among the reasons for the frustration, financial sector executives cite access difficulties and communication problems. But there is an understanding that, after the adjustments, only those who didn’t want to clear their name with Desenrola didn’t.

A campaign promise by President Luiz Inácio Lula da Silva, Desenrola was launched in July 2023 to settle debts contracted between 2019 and 2022 and impacted by the pandemic. Initially, it was due to end in December, but Track 1, for the low-income population, was extended twice.

At the start, participating banks cleared the names of customers who had debts of up to R$100 – benefiting 7 million people. At the same time, financial institutions began renegotiating bank debts with their own customers with monthly incomes of up to R$20,000. In this modality, 3 million people negotiated liabilities of R$26.5 billion – R$2.1 billion after discounts.

Finally, in October, the most eagerly awaited phase was launched, Track 1, aimed at the low-income population, with a Treasury guarantee in the event of default. In this stage, in addition to bank debts, debts such as electricity and water bills, educational fees or retail purchases were included.

This option was available until Monday for people who earn up to two minimum wages or are registered on the government’s Single Registry for social programmes, with debts of up to R$20,000. The instalment conditions are special: up to 60 months, with interest of up to 1.99% per month. R$8 billion was made available for the Operations Guarantee Fund (FGO), in order to guarantee any default.

On average, the discounts were 83% for a stock of R$151 billion in debts registered in the system, from 654 creditors. The potential was to reach 32 million people. Of these, 4.93 million took part in this phase of the programme, reducing liabilities from R$24.91 billion to R$3.6 billion so far. R$1.7 billion has been used up from the FGO.

«For the vast majority of people in debt, Desenrola was a great opportunity. It was a chance to rebuild their credit score for the market», summarises Rafael Baldi, director of Products at Febraban.

The most negotiated debt was related to credit cards, such as revolving credit cards, accounting for 44 per cent of agreements. The average discount for this segment was 96 per cent. The law that created Desenrola limited the amount of interest to 100 per cent of the original amount as of January this year.

«If we look at the programme as a whole, it’s a great result with minimal public resources, with great gains in regulation and cooperation between the players to enable this result» said Quênio França, Programme Director at the Ministry of Finance, highlighting the ‘innovative’ experience of bringing together banks, more than 600 creditors and a billion-dollar debt universe.

Impact of fake news

Part of the public preferred to pay cash. Of the R$14.2 billion in debts negotiated directly on the Desenrola website, R$3.1 billion were paid on the spot. In addition, the director explained that there were agreements reached through other channels. According to Serasa, negotiations on its own platform increased by almost 10 per cent during Desenrola compared to the same period last year, to 33 million.

«We do see it as a programme that worked. Of course it wasn’t going to get 72 million people out of default, but it did manage to help several families» said Aline Maciel, Serasa’s manager.

Original Story: O Globo | Author: Thais Barcelos
Edition and translation: Prime Yield