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