Brazil plans to spend 15 billion reais to acquire overdue consumer debt, President Lula to include plan in economic agenda and tie it to re-election campaign
The Brazilian government plans to spend up to 15 billion reais to acquire overdue personal debts from banks, with a face value of approximately 150 billion reais (about 28 billion USD). Planning Minister Bruno Moretti stated that an auction will be held in November, targeting debt packages of no more than 10,000 reais, overdue between two and four and a half years. President Lula will include the plan in the economic agenda and tie it to his re-election campaign.
Lula signed a temporary measure in São Paulo to launch Desenrola 3.0. Unlike the previous two versions where debtors negotiated with banks, this round involves the federal government directly purchasing the debts and restructuring them, passing the discounts obtained from the auction fully to the debtors. It covers credit card revolving debts and personal loans without wage deductions, excluding loans with wage deductions. The Ministry of Finance estimates that about 300 billion reais of existing debts qualify, aiming to acquire half; the statutory minimum discount is 90%, with hopes for a higher rate. The first auction will target credit cards and personal loans without wage deductions, executed by the treasury or a federal financial institution, with the planning minister stating that the initial allocation may be 5 billion reais, with the remainder released as the auction progresses. Officials say it could benefit up to about 15 million people. The auction is scheduled for November, after the October elections.
Banks are selling old debts that they have largely given up on collecting, while the government is buying votes and goodwill. Funds will flow from the treasury to banks' non-performing loans, erasing household debt at face value, with the treasury accounting for it at a fraction of the value. Beneficiaries include debtors of small credit card debts and personal loans overdue for more than two years, as well as banks clearing provisions; the pressured parties are the treasury's main keys and the potentially rewritten recovery expectations in the collection market. The event is driven by pre-election temporary measures, with cash settlement occurring after the auction.
Source: Public Information
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Lula's first version of Desenrola in 2023 helped about 15 million people restructure debts, with plans to raise income limits and guarantee amounts again in May 2026. The third version no longer involves mediation, changing to the state as the buyer of non-performing assets. The debts are overdue between two and four and a half years, capped at 10,000 reais, which are precisely the debts that banks have discounted and sold to collection agencies. The November auction is set after the October vote, with the announcement made before the vote; the timing structure is political, while cash flow is post-election.
The capital path involves the treasury purchasing bank retail non-performing loans at a discount. Banks can cash out at 10% of face value or lower, releasing capital and collection costs; the government records the discount as debt relief for households, with the treasury's official estimate around 15 billion reais. Unlike the previous version that leveraged a guarantee fund for new loans, this round directly buys out existing debts. Digital banks and card issuers with a high proportion of revolving credit card debt will clear faster.
This is comparable to the U.S. subprime mortgage modification plan, Argentina's periodic debt forgiveness, and India's loan restructuring window: the commonality is rewriting the losses already priced in by the private sector into a state-purchased social policy. Brazil's benchmark interest rate remains high, inflation targets are unstable, and consumer loan prices are already expensive; the state entering to buy the worst tail end effectively gives banks a policy exit.
The structural change belongs to capital concentration. Non-performing retail debts are concentrated from a dispersed collection market into a single auction list by the treasury. Pricing power shifts from the recovery curve of collection agencies to a government-set minimum discount of 10%. The mechanism is: debts are announced for purchase before the election, but the transfer occurs after the election.
ABAB News · Cognitive Law
Debt purchases announced before the election, transfer occurs after
Buying at a 10% discount involves debts banks have given up on
Clearing is about credit records, not the interest rates themselves