Desenrola 3.0 turns Brazil’s government into something unusual: a buyer at a debt auction. On Sept. 25, President Luiz Inácio Lula da Silva’s government said it will spend 15 billion reais to buy up to 150 billion reais, about $28 billion, of old unpaid consumer debt from banks. The auction is planned for November. The first round of the presidential election is this Sunday, Oct. 4.
The auction runs backwards. In a normal auction, buyers compete by offering more. Here, sellers compete by asking for less. Banks and other lenders offer their bad loans at a discount, and the biggest discounts win. It is the mirror image of a Treasury auction, where buyers compete to lend to the government. Lenders also have to hand over all of a borrower’s eligible debts at once, so they can’t sell off only their worst loans.
Why would a bank sell a loan for about 10 cents on the dollar? Because it already gave up on it. The program only covers debts of up to 10,000 reais (about $1,900) that have gone unpaid for roughly two to four and a half years, mostly credit card balances and personal loans. After that long, a bank has usually written the loan off as a loss. Selling written-off debt to collection firms for a small slice of its face value is normal business. This time, the government is the buyer at the table, and it passes the full discount on to the borrower.
This is the third version of the program. The first Desenrola, in 2023, had people renegotiate with their banks one by one. Lula said the difference now is that the government buys the debt and settles it on the borrower’s behalf. The same day, he also banned online betting, which his government blames for draining household budgets.
Then there’s the obvious question: what about people who paid? Critics in Brazil, including an O Globo editorial in May, have argued that repeated relief punishes borrowers who keep up with their bills. The government seems to have seen this coming. In June it opened a separate track for good payers, offering cheaper refinancing to informal workers who had already made their installments on time. Whether that stops people from simply waiting for the next round is the real test, and Desenrola 3.0 won’t answer it before Sunday.
Here is the part I find most interesting. The 150 billion reais figure is not a promise. It’s a ceiling, and it depends on how deep the banks cut. If lenders offer 90% off, 15 billion reais clears 150 billion reais of debt. If they offer only 80% off, the same money clears half as much, about 75 billion. So how many Brazilians walk away debt-free will be decided less by the government’s budget and more by the discounts banks write on their bids in November.
My take: The banks set the discount. The election set the date.
Not advice. Just how I see it.