Of every 100 reais Brazilian banks have lent, 5 reais have now gone unpaid for more than 90 days. That is the picture in figures released on Tuesday by the Central Bank of Brazil: the average default rate on credit operations rose from 4.9% to 5% between July and August. It is the highest level since March 2011, the start of the bank's revised historical series.
The meaning for households is plain: more families and companies have stopped paying what they owe. Among individuals, the rate rose from 5.8% to 6%, also a record for the series, the bank said. For every 100 reais lent to consumers, 6 are more than three months late.
Households lead the rise
Among companies the rate was stable at 3.3%, the highest level since October 2017, when it hit 3.4%. CNN Brasil put the overall August rate at 5.04%, up 0.1 point in a month and 0.9 point over 12 months. Before falling behind, the typical Brazilian household already commits nearly half its income to debt payments: the ratio stood at 49.9% in July, unchanged from June.
Explain it: the Central Bank counts a loan as defaulted once it is more than 90 days overdue, for individuals and companies alike. The comparable series starts in March 2011, when the bank revised its methodology. A record in this series means the worst reading in more than 15 years of comparable data.
Relief programs and the card problem
The increase comes in the middle of Brazil's election campaign and only months after the government launched Desenrola Brasil 2.0, a debt renegotiation program, in May. Last week it announced a new round meant to restructure 150 billion reais in debts overdue by two to 4.5 years. The plan is for the federal government to buy the loan portfolios from banks at a 90% discount, spending 15 billion reais.
The round will cover installment and revolving credit card debt and personal loans without payroll deduction, up to 10,000 reais per debt, according to Planning Minister Bruno Moretti. Meanwhile the costliest credit keeps growing: banks handed out 311 billion reais in revolving card credit from January to August, close to the 400 billion reais of all last year. The revolving option, triggered when a customer cannot pay the full monthly bill, charges 445% a year, and since January 2024 such a debt cannot exceed twice the original amount: a 1,000-real bill becomes at most 2,000.