Brazil has more delinquents than Argentina: dictator Lula Da Silva ordered the state to pay 90% of the debts

Brazil plans to allocate 15 billion reais, about USD 2.8 billion, to purchase up to 150 billion reais, equivalent to about USD 28 billion, in delinquent debts of individuals accumulated in the private banking system. The declared objective of the Executive is to absorb the uncollectible liabilities of families through a direct state intervention and, subsequently, refinance those obligations centrally with the consumers themselves. The economic maneuver of dictator Luiz Inácio Lula da Silva is part of a strategy deployed to alleviate the financial squeeze on households at the expense of the National Treasury, in his attempt to consolidate the political structure that will allow him to compete for a fourth term.

In macroeconomic terms, the credit landscape in Brazil shows a total stock of overdue debts that hovers around 300 billion reais, approximately USD 56 billion. This large volume of unpaid debts is primarily composed of overdue balances on credit cards and personal loans not directly deducted from payrolls. With the implementation of this bailout plan, the regime's goal is for the Brazilian state to aggressively intervene in the financial market until it absorbs 50% of the entire overdue volume in the country.

Regarding the operational design detailed by Planning Minister, Bruno Moretti, the acquisition of delinquent portfolios will be executed through a competitive auction scheduled for the month of November. The eligible banking portfolios must correspond exclusively to debts of individuals with individual amounts of up to 10,000 reais, about USD 1,866. Additionally, the obligations must have an age of between two years and four and a half years, a range prior to the operation of the legal statute of limitations for collection, set by current regulations at five years.

The projected commercial conditions contemplate that private banks compete with each other by offering the largest possible discounts to dispose of their toxic assets. The state plan anticipates obtaining discounts of up to 90% or even exceeding 90% and 95%, a margin of forgiveness that will then be fully transferred to the debtors. Under these estimates, the absorption of the block of 150 billion reais in delinquency will require an estimated fiscal cost of 15 billion reais.

While private transactions of this type typically move around 50 billion reais per year, the state intervention aims to triple the operational scale of the market in one go.

The financial mechanism will replace the traditional market scheme where "each person goes to the bank to try to renegotiate their own debt" with a structure centralized in the hands of the state. According to the official statements of Bruno Moretti, "This reduction is directly transferred to households". The technical execution of the operation will be the responsibility of the National Treasury or banking entities under state control, such as Banco do Brasil or Caixa Economica Federal.

Alongside the credit bailout, the provisional measure will include specific directives for regulatory bodies, with special emphasis on the Central Bank, aimed at curbing excesses in credit granting and preventing users from falling into over-indebtedness.

The regulatory package drafted by Lula da Silva will be articulated with the signing of a decree to prohibit sports betting and online casinos, two issues that authorities consider linked to the family financial crisis.

The deployment of these multimillion-dollar fiscal resources coincides with a highly polarized political scenario just days before the elections, where polls reflect a technical tie between the government and conservative senator Flávio Bolsonaro. This measure adds to a series of recent populist disbursements, such as the increase in direct transfers from the Bolsa Família program and state interventions to artificially reduce the costs of fuels.