Nearly 70% of Brazilian families are in debt, highest percentage in more than a decade

RIO DE JANEIRO, BRAZIL – Brazil has reached the end of the first half of this year with the highest percentage of indebted families in more than a decade, according to the National Confederation of Commerce of Goods, Services, and Tourism (CNC).

The Survey of Consumer Debt and Inability to Pay (Peic), conducted since 2010, registered a record 69.7% of Brazilians in June, an increase of 1.7 percentage points compared to May when this percentage was 68.0%. Compared to June 2020, when the percentage of indebted people was 67.1%, the increase was 2.5 points.

The CNC survey considers debts the outstanding bills for postdated checks, credit cards, overdraft checks, business credit cards, consignment loans, personal loans, car, and house payments.

Delinquencies also worsened in June for the second month in a row. The percentage of families with debt or bills in arrears reached 25.1%, up from 24.3% in May. However, in June 2020, defaults were higher, reaching 25.4% of families.

The total number of families who declared that they would not pay their bills or overdue debts and, therefore, remain delinquent, increased from 10.5% in May to 10.8% in June. The result was still 0.8 percentage points below the 11.6% observed in June 2020.

According to the CNC, families’ budgets was affected by factors such as higher inflation and the reduction in the payment of emergency aid by the government.

The poorest families are more indebted and have more defaults. Among those earning up to ten minimum salaries per month, the percentage of indebted families increased from 69% in May to 70.7% in June. Among families earning more than ten minimum salaries per month, the percentage of indebted families increased from 64.2% to 65.5% during this period.

The total debt incurred in June was R$2.8 billion, a daily average of R$2.6 billion, or 2.9% more than the previous month.

The percentage of families that described themselves as highly indebted fluctuated from 14.6% in May to 14.7% in June, the highest percentage since July last year.

The average time Brazilians spend in debt has also increased due to factors such as low-interest rates, which allow renegotiating debt and encourage financing with longer terms, said economist Izis Ferreira, responsible for the CNC survey.

“Household debt has extended over a period of more than a year. Credit has helped Brazilians by acting in the recomposition of income. Still, every month we fear that the family budget reaches a level of difficulty that further hinders consumption and makes it difficult to reorganize the economy,” Izis warned in a statement, adding that governments’ social programs have helped avoid a bigger problem, especially in the case of defaults.

The average debt duration of indebted families has shown an upward trend since April, rising from 7.0 months in May to 7.1 months in June. Of the total families in debt, 22.4% have debt due in up to three months, while 32.7% of families are in debt for more than a year.

The percentage of families reporting credit cards as their primary type of debt reached a record 81.8% in June. The other most frequently cited debt types were installment payments for stores (17.5%), car loans (11.9%), personal loans (10.0%), and home loans (9.1%).