Millions of Brazilians struggle to pay their debts

With the arrival of the covid-19 pandemic, he was fired and, since then, he has had to do what he can to guarantee his livelihood and that of his son. Currently, he sells backpacks that are displayed on a tarp for people who walk along the busy street in Rio.

“Some days it sells, some days it doesn’t. Some days they sell five, eight backpacks. In others, it sells two. It’s difficult, the (municipal) guards want to take (seize) the backpacks”, regrets Guilherme.

The loss of his job also involved him in a situation that today affects 66 million Brazilians, according to data from the National Confederation of Shopkeepers (CNDL): the young man is unable to pay his bills.

Without a stable source of income, Guilherme is unable to pay off his credit card debts. “I couldn’t afford to pay the bank. I made a credit card and didn’t have money at the time to pay. I have card debts from two banks, ”he says. “I don’t have any plans to be able to pay that off. It’s hard”.

Default, that is, bills or debts in arrears, affects, according to the CNDL, four out of ten adult Brazilians.

The number of overdue debts in Brazil, in April this year, grew 18.42% compared to the same period last year. Debt with banks is, according to the CNDL, the main reason for default: 63.8% of the total.

And, just like Guilherme, on average, defaulting Brazilians owe two companies. Almost half of Brazilians in the age group to which street vendors belong (25 to 29 years old) are in default.

Rio de Janeiro (RJ), 05/23/2023 – Shoe shiner José Raimundo at his work stop, on Rua Uruguaiana, in the center of the capital of Rio de Janeiro. Photograph: Tomaz Silva/Agência Brasil

But it’s not just young people who face the problem, nor are banks the only source of hard-to-pay debts. Seu José Raimundo, 67, is also self-employed. He has worked for years as a shoeshine boy, a few meters from where Guilherme sells his backpacks.

And just like his fellow seller, he was greatly impacted by the pandemic. Still unable to count on a pension – he applied for the Elderly Assistance Benefit, but has not yet received the Social Security endorsement to receive the money – he lost a large part of the clientele that used his services before covid-19.

“Just because of the pandemic, I stayed at home for almost two years. Then I got sick, unable to do anything. I spent three years and a little without working. And then it was delaying everything. My wife alone paying for everything: water, electricity, telephone. What I delayed the most was the water bill. When the benefit (from Social Security) comes out, I’ll talk to the concessionaire and pay it in installments. I don’t want to owe anyone anything. I don’t have the nature of a bad payer”, says the shoeshine boy who recently resumed his job.

Three out of four seniors aged 65 to 84 are in arrears in the country. Water and electricity account for 11.1% of defaults, a percentage similar to that of commerce, which represents 11.6% of unpaid debts.

And default does not spare even those who have a formal job. Alessandro Gonçalves is 30 years old and works as a doorman in a commercial building in downtown Rio.

Every month, he has to juggle making sure his money meets his daily needs. And that involves delaying the payment of some bills. “It is that routine difficulty. You have a bill to pay and you can’t. It arrives at the end of the month, takes the money to pay the bill and fails. Our salary, we make an account and, when it arrives at the end of the month, we cannot pay. And then we have to delay the bills”.

Photo: Marcello Casal Jr/Agência Brasil

Income

According to Merula Borges, a finance specialist at the CNDL, loss of income is one of the reasons why people default.

“In the survey, when people were asked about the reason they went into default, they said they had lost income or themselves, or someone in the family”, says Merula. “This is natural since, when income is lower, the space that basic items occupy in the family budget is greater and people are less likely to deal with any unforeseen events that may happen”.

According to the expert, those with lower incomes also need more financial discipline to avoid default.

“There is, yes, a possibility for people to remain in debt, despite the lower income, but it is much more difficult. So, the focus of those with a lower income needs to be on improving their qualifications, looking for free courses, possibilities to improve their own income to get into a slightly more comfortable situation”.

Merula says that public policies are needed to help Brazilians get out of this default situation. The federal government is preparing a program, called Desenrola, which intends to renegotiate up to R$50 billion in debts owed by 37 million individuals.

The policy is being prepared by the Ministry of Finance, which, in response to the Brazil Agencystated that “it does not manifest itself on measures in preparation”.