Number of indebted Brazilians up at end of 2020

After three consecutive reductions, the number of Brazilians in debt took an upward turn in the last month of 2020, Brazil’s National Confederation of Trade in Goods, Services, and Tourism (CNC) announced today (Jan. 6). The Survey on Consumer Indebtedness and Insolvency (PEIC) for December found that 66.3 percent of consumers are in debt, up 0.3 percentage points from November. Year on year, the indicator saw a spike of 0.7 percentage points.

In the opinion of CNC President José Roberto Tadros, credit should stand out in the resumption of the economy in 2021. “It’s important not only to keep expanding access to resources with lower costs, but also to extend deadlines for the payment of debts in order to mitigate default risks in the financial system,” he said in a note. Tadros further pointed out that a significant part of credit offered during the COVID-19 pandemic was granted with a grace period, and should be due early this year.

As for income, indebtedness started showing similar trends in December. Among families making up to ten minimum wages ($196.4), the percentage went up to 67.7 percent of the total after three lows in a row. For families with an income of up to ten minimum wages, the indicator rose to 60 percent.

According to Izis Ferreira, the CNC econimist in charge of the research, after the end of the emergency allowance granted up to December 2020 to mitigate the effects of the pandemic, lower-income families receiving the benefit need to be more strict about organizing the household budget in January.

Default on the wane

Despite the increase in indebtedness, consumers continue able to settle debits and financial commitments. The total amount of families with debts or overdue bills saw the fourth consecutive decline, down from 25.7 percent in November to 25.2 percent in December. Compared to the same month in 2019, the proportion is up 0.7 percentage points.

The portion of the families stating they are in no condition to pay their overdue bills or debts and therefore will remain on default experienced a new reduction, from 11.5 to 11.2 percent. In December 2019, the indicator stood at ten percent.

Regarding the different types of debt, the proportion of Brazilians using the credit card started growing again, reaching 79.4 percent of families—the highest rate since January 2020—and is still the main modality of indebtedness. Overdraft also increased among indebted families. “Both modalities are associated with immediate consumption in the short and long run,” Ferreira mentioned.