17.3% of Brazilian families declare themselves heavily indebted, reveals research

The number of families who declare that they have outstanding debts (post-dated checks, credit cards, overdrafts, store vouchers, payroll loans, personal loans, car and home installments) remained stable in April, reaching 78.3% of Brazilian families. The data are from the National Confederation of Trade in Goods, Services and Tourism (CNC). Among these families, 17.3% would be “heavily indebted”, an index that grew again after two drops in the scenario of high interest rates.

Economist Ricardo Teixeira, coordinator of the MBA in Financial Management at Fundação Getúlio Vargas (FGV-IBRE), explains the reasons that lead to indebtedness.

“The main cause of indebtedness is, without a doubt, the lack of planning. When a person, for example, is going to make a purchase in 12 installments, he always thinks whether that installment he is paying fits in the monthly budget, but forget those expenses that are seasonal and happen once a year”, he points out.

Consumer indebtedness fell in October 2022, but grew between January and February 2023 with budgets tightened by typical expenses at the beginning of the year and remained stable in March and April. CNC’s estimate is that the proportion of indebted people will grow again in July this year.

For Teixeira. As people get more indebted, there is less money left over for them to even make day-to-day purchases. In this context, he emphasizes the impacts that the indebtedness scenario can cause in the commerce and service sectors.

“When we have a society that is heavily indebted, we start to realize that even monthly household purchases begin to be reduced so that they don’t go into the red and don’t have their name placed on a bad debtor register. So, whenever there is a high level of indebtedness on the part of society, we also see economic activity, in a way, being reduced due to a lower demand and a lower demand because people are indebted” he highlights

Still according to the CNC survey, the improvement in disposable income with the evolution of the labor market and the easing of inflation helped to reduce the number of consumers who delayed their debts in April. The indicator fell for the fourth consecutive month, with a reduction of 4 percentage points, corresponding to 29.4% of all families, below the quarterly average (29.7%).

The average interest rate on all credit operations with free resources to individuals reached 58.3% per year in March, that is, 8.7 points higher than in the same month of last year, according to data from the Central bank.