Debt grows among the poorest with a pandemic and emergency aid halted – 05/04/2021 – Market

With the impact of the pandemic and the delay in the release of emergency aid, the indebtedness of the poorest Brazilians’ bands went up again. In April, 22.3% of Brazilians with a family income of up to R $ 2.1 thousand indicated they had debts, a record level, according to a survey by FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation).

This percentage had only been verified in June 2016. At the time, the country was plunged into an economic crisis and suffered from the political turmoil generated by the impeachment of ex-president Dilma Rousseff (PT).

The FGV Ibre historical series has been gathering data since May 2009. In March 2021, the percentage was 22.1%. In April 2020, in the initial phase of the pandemic, it was 21.6%.

At the beginning of the year, further advances in coronavirus led to restrictive measures in different regions. As a result, the activity of companies, especially commerce and services, was paralyzed, again restricting the turnover of businessmen and the income of workers.

The financial situation was aggravated by the interruption of programs to stimulate the economy, including emergency aid. Created in 2020, the benefit served to replenish the income, especially of the informal ones. The payment of the aid was only resumed by the federal government in March, with a reduction in the amounts and in the number of beneficiaries.

The new round of benefit will have four installments from April to July. The average monthly amount is R $ 250. The amount can vary from R $ 150 to R $ 375, according to the composition of each family.

“There is a combination of factors to explain the increase in indebtedness. The worsening of the pandemic contributes to this, because consumers, unable to work, get into debt. There was also an interruption in emergency aid and a reduction in the amount paid ”, stresses Viviane Seda, a researcher at FGV Ibre.

According to Viviane, the improvement in the situation depends on the reaction of the labor market. The number of unemployed in Brazil reached 14.4 million in the quarter ended in February. This is the largest contingent since 2012, according to IBGE (Brazilian Institute of Geography and Statistics).

“The job market needs to react so that people are able to organize financially. The point is that the market will only resume when companies are safe to hire. For that, vaccination against Covid-19 needs to happen more quickly ”, says Viviane.

Among the income ranges surveyed by FGV Ibre, the second highest percentage of indebtedness, in April, was that of the group with income between R $ 2,100 and R $ 4,800. According to the survey, 14.2% of this tier had difficulty paying the bills.

In the income range of R $ 4.8 thousand to R $ 9.6 thousand, the percentage of indebted people was 6.3%. Finally, in the group with earnings above R $ 9.6 thousand, the percentage was much lower, at 3.9%.

Professor at ESPM (Escola Superior de Propaganda e Marketing) in Porto Alegre, economist Fábio Pesavento points out that, during the pandemic, the skyrocketing prices of products such as food hit the poorest strata. It is that, in proportional terms, groups with lower income commit most of the budget for the consumption of basic items. Thus, the amount available for other expenses is more streamlined.

“A large part of these people are in the informal sector. In addition to the lower income, the price of what is consumed by the poorest has gone up a lot. It is the worst case scenario ”, says the economist.

“The capacity to generate jobs and income is limited, and we still face the slow vaccination against covid-19. The indebted sectors are the ones that suffer the most ”, adds the professor.

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