Credits at risk: Brazil lowered rates, but delinquencies remain at record levels

The delinquency rate unallocated credit Brazil rose to 5% in July, reaching its highest level since January 2018despite a minor decline in bank lending rates, as well as a government-initiated debt renegotiation incentive program.

A broad indicator of default rateswhich covers both individual borrowers and companies, rose from 4.9% in June and 3.8% in the same period last yearshowed the data of the Central Bank of Brazil this is monday.

In mid-July, the government launched the first phase of a comprehensive debt renegotiation program of consumers called “Desenrola Brasil”, in which the banks began to offer consumers the possibility of directly renegotiate your debts.

Brazil’s deleveraging policy

In exchange, the government granted regulatory incentives to increase the availability of credit from banks.

The rise of the delinquency rate occurred despite the application of the program and a marginal decrease in the average interest rate of the credit not earmarked for specific purposeswhich reached 44.3% annual in July, compared to 44.6% the previous month.

He central bank it began a cycle of monetary easing in August, reducing its reference rate by 50 basis points, to 13.25%, after almost a year of rate stability aimed at curbing inflation.

The spreads of the Bank loans they experienced a slight contraction to 33.0 percentage points in July, compared with 33.1 percentage points in June.

Reflecting a more difficult credit environment, the total loans outstanding in Brazil experienced a decrease of 0.2% in June compared to the previous month, amounting to 5.405 trillion reais (1.11 trillion dollars).

This decrease was mainly due to the reduction in loans to companies, the Central Bank said.

In the last year, the expansion of loans continued to slow down, reaching 8.2%, down from 9.2% in June.