Brazil Plans to Buy Up Old Household Debts at Up to 95% Off Before Vote

BRAZIL · HOUSEHOLD DEBT

Brazil’s government is preparing to buy up old household debts that banks no longer expect to recover, then clear debtors’ names. President Luiz Inácio Lula da Silva is due to present the plan in São Paulo on Friday afternoon, 25 September.

Finance Minister Dario Durigan has said the Treasury could buy such debts through auctions at discounts of 95% or more. The launch falls nine days before a presidential first round in which Lula is running close to his main rival.

How the debt purchase would work

The idea is simple on paper. Banks and collection firms hold millions of old household debts, mostly small, that have gone unpaid for years.

Some have already been taken off bank balance sheets and sold to specialist debt collectors, according to Valor Econômico, a business daily. The plan would let the Treasury buy them in bulk.

Creditors would compete in an auction by offering discounts. The bigger the discount, the less public money is needed to wipe out a given amount of debt.

That differs from Desenrola, Lula’s 2023 renegotiation programme, in which debtors logged on to a government platform to accept new terms. This time the debtor would not have to renegotiate anything.

Durigan told the Rio newspaper Extra that the government was “moving toward a model” of auctions. The aim, he said, is to buy debt “with a high discount” so public accounts take little strain.

What happens after the purchase is not settled. On 18 September Durigan told the news portal UOL the Treasury could keep collecting a reduced sum or treat debts as paid.

“If the banks themselves consider these debts unrecoverable, it is important that we clean up people’s names,” he said. In Brazil, a debtor in default is listed by credit bureaus such as Serasa and often cannot get new credit.

Durigan also named Emgea, a state-owned debt-recovery company, as a possible vehicle, according to the newspaper Gazeta do Povo.

Who could qualify

No eligibility rules had been published by Friday morning. The newspaper Folha de S.Paulo reported on 18 September that the target group would mirror earlier Desenrola rounds.

Folha said the focus was debts of up to R$15,000 (about US$2,900) taken out during the pandemic years of 2020 to 2022. The Novo Desenrola, launched in May, covered people earning up to five times the minimum wage.

Fabio Graner, a columnist at the Rio daily O Globo, reported the favoured design targeted small debts two to five years old. The newspaper Estadão described debts up to five years overdue that creditors no longer expect to collect.

The five-year line matters. Under Brazil’s consumer code, a negative entry must be removed from credit-bureau records after five years.

Whether unpaid water and electricity bills will count is also undecided, according to O Globo.

What it would cost the Treasury

Valor reported that internal estimates put the cost below R$10 billion (about US$1.9 billion). Graner wrote that the options on Lula’s desk ranged from R$5 billion to R$10 billion (about US$970 million to US$1.9 billion).

At a 95% discount, R$10 billion (about US$1.9 billion) buys debts with a face value of R$200 billion (about US$39 billion). That is roughly a third of all overdue debt in Serasa’s latest national count.

According to Graner’s sources, those options could clear the names of at least half of today’s defaulters. That is an internal projection, not an official target.

Graner also wrote that the purchase would count as primary spending, whether the debts are later cancelled or kept. That matters because Brazil’s fiscal target is set on the primary balance, which excludes interest payments.

Valor reported that the economic team intends to fit the cost inside the existing budget and fiscal rules. How it will do so has not been explained.

How deep Brazil’s household debt runs

Serasa counted 83.98 million Brazilians in default in August, up just 0.06% from July. That equals about two in five Brazilians, children included.

Their overdue debts totalled R$586.4 billion (about US$113 billion) in July, according to Serasa. The central bank’s figures point the same way.

Household loan defaults, meaning payments more than 90 days late, reached 5.8% in July. That was the highest since the series began in March 2011 (see Brazil’s Household Loan Delinquency Climbs to a July Record).

Repayments took a record 28.9% of family income in June. Total household debt that month stood at 49.8% of a year’s income, a tenth of a point below the record.

Earlier relief rounds helped but did not reverse the trend. The first Desenrola renegotiated about R$53 billion (about US$10 billion) for around 15 million people from 2023.

The Novo Desenrola renegotiated R$28.37 billion (about US$5.5 billion) between May and August, Finance Ministry data show. Yet O Globo found 30.34% of loans refinanced in instalments behind on payments in September, a figure the ministry is checking.

Credit cards, Pix and tighter lending

The debt purchase is not the only measure expected. On 24 September, at a rally in Alagoas state, Lula said banks send out credit cards unasked and promised action.

He also said the government should “supervise a little” how banks handle Pix, Brazil’s instant-payment system. Poder360, a Brasília news site, reported that changes to credit rules would form part of the package.

Folha reported that officials see tighter lending safeguards as essential, so relieved debtors do not fall straight back into arrears. The central bank said in August it was preparing measures on the costliest credit lines.

The election and the critics

Brazil holds the first round of its presidential election on Sunday 4 October. Lula faces Senator Flávio Bolsonaro of the right-wing Liberal Party, son of former president Jair Bolsonaro.

Polls show a tight race, as in Brazil Poll Shows Lula Edging Flávio Bolsonaro 46% to 45% in a Runoff. Flávio has made a rival promise.

His SOS Brasil plan would have the government buy debts from banks and refinance them through the state lender Caixa. He has spoken of discounts of up to 90% and a six-month grace period.

O Globo noted he has not said who would qualify or what it would cost. Opposition advisers put a similar scheme at R$7.5 billion to R$10 billion (about US$1.4 billion to US$1.9 billion), the paper reported.

Government lawyers weighed election law before the launch, Valor and O Globo reported. Brazil’s Elections Law bans handing out free goods, money or benefits in an election year.

The main exception is social programmes set in law and already funded the year before. Officials who see no obstacle point out that Desenrola is already running.

Valor said the legal risk is greatest if the Treasury cancels debts outright, with nothing asked of the family. An O Globo editorial in May called the Desenrola relaunch “electioneering” and said repeated relief “punishes the good payer.”

Durigan defends the approach. He blames a “pandemic of debt” inherited from the previous government and calls each programme a “vaccine” for a chronic problem.

What comes next

Lula is due to present the package at 5 pm Brasília time on Friday at the Finance Ministry’s São Paulo office. Valor reported that the debt programme would need a provisional measure, a decree that lapses after 120 days unless Congress approves it.

Timing is unclear. Durigan told UOL on 18 September that auctions involve formal steps, so purchases would begin in early 2027.

A source quoted by Folha suggested November. Either way, there is no sign-up yet, and the announcement itself clears no one’s debt.

Nor would it mean cheaper credit for everyone. The plan targets old household debts that creditors have given up on, not the repayments squeezing families who still pay on time.

The details to watch are the legal text, the auction rules, the income limits and the final price tag. All conversions here use BRL 5.175 per US dollar (open.er-api.com, 25 September 2026).

More: Brazil news in English, every day from The Rio Times.

Frequently Asked Questions

What is Brazil’s plan for old household debts?

A proposal for the Treasury to buy long-unpaid consumer debts from banks and collection firms at deep discounts, through auctions. The debts could then be cancelled or collected at a reduced value.

Who would qualify?

Official rules were not public by Friday morning. Reports point to small debts, mostly from 2020 to 2022, held by people like those eligible for earlier Desenrola rounds.

When would debts be cleared?

No date is official. Finance Minister Dario Durigan has said purchases would start in early 2027; one source told Folha de S.Paulo it could be November.

How much would it cost?

Reported estimates range from R$5 billion to R$10 billion (about US$970 million to US$1.9 billion). The final cost depends on the discounts creditors offer and on which debts are included.

Sources: Valor Econômico (24 and 25 September 2026), as also reported by InfoMoney; Folha de S.Paulo (18 September); O Globo, including columns by Fabio Graner (18 and 25 September); Extra interview with Dario Durigan (17 September); UOL interview as reported by Estadão and Gazeta do Povo (18 September); Estadão (24 September); CNN Brasil and Poder360 (24–25 September); Serasa Mapa da Inadimplência (July and August 2026); Banco Central do Brasil credit statistics released 28 August 2026; Law 9.504/1997, article 73.

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