At the beginning of the pandemic, Sidneia Soares, 49, received the news that she would be fired. With the beginning of the movement restrictions, the store where she worked, in São Paulo, closed its doors, and she became unemployed. Since then, he has turned around with informal jobs. But the bills kept coming. Without the minimum wage he received, he needed the help of family members not to delay basic payments, such as electricity, water and condominiums.
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Now, working as a cafeteria attendant and also as an apprentice at a hairdressing salon, Sidneia managed to fit the bills into her budget, but she still has no forecast on how she will pay the Student Financing (Fies) fees she contracted. “I cut back on my spending and reworked everything.”
With income affected by the covid-19 pandemic, families like Sydney’s and companies alike have never been so indebted. Data released yesterday by the Central Bank show that the household indebtedness reached 58.5% in April, the highest percentage in the historical series, started in January 2005. This means that for every R$100 that a family received in the last year, it already has a contracted debt of almost R$60. The monthly income commitment was 30.5% in April – that is, for every R$100 received per month, R$30 was used to pay loan installments.
A survey by Cemec-Fipe shows that the set of debts of non-financial companies in Brazil reached 61.7% of the Gross Domestic Product (GDP) in March 2021, also a historic level. At the end of 2019, before the pandemic, this ratio was 50.1% (more information on this page).
The tightness in the pockets of families, especially at a time when unemployment and inflation are high, may hinder the resumption of economic growth, according to economists. “Interests will rise, and families that are already in debt will have even more expensive credit options, which could compromise the resumption of consumption next year,” says Sérgio Vale, chief economist at MB Associados. He calculates that the economy will only grow 1.8% next year and that job recovery will be slow.
This, in his view, will have a direct impact on Brazilians’ income, which is already at a low. According to IBGE data, the mass of salaries in circulation fell R$ 12 billion in one year, which represents a 5.4% decline in the quarter ended in April compared to the same period in 2020. In other words, Brazilians are, besides being more indebted, poorer.
To top it off, the household savings rate has been falling sharply since the second quarter of last year. According to calculations by Itaú Unibanco, the indicator reached 31.1% in the period between April and June of last year, largely due to the closing of stores in general at the beginning of the pandemic, and has already returned to 11.8% in the first quarter of this year.
“Many low-income families stopped receiving emergency aid at the beginning of the year and needed to look for other forms of credit”, says the coordinator of the Center for Capital Market Studies (Cemec-Fipe), Carlos Antonio Rocca, who assesses it as a One of the main features of the current crisis is the greater differentiation between income classes.
In the view of Gustavo Ribeiro, chief economist at Asa Bank, the decrease in Brazilian income does not allow for an expansion of the economy through credit, after all, many are not even able to pay their day-to-day bills.
Indebtedness can be positive for a person, if he is planning for a large purchase, such as real estate, or even to leverage his business. But that is not what has happened to many low-income Brazilians during the pandemic, who seek loans to pay basic bills. They even find it difficult to get a credit line.
A survey released by Serasa points out that banks deny 44% of loan applications for people who earn less than five minimum wages per month.
One such case is that of 39-year-old day laborer Eveline da Silva. She saw her income drop by almost a third during the pandemic, to R$600, and her husband’s salary cut in half. Last month, he took out a credit card so he could throw a birthday party for his daughter. He got a card with a limit of R$500 and spent R$250 to buy ingredients for sweets and snacks.
“I’m going to pay the bill on the next 5th, because I don’t want to get involved with the interest. After that, I’ll keep the card in my pocket,” says Eveline.