The January CDL Porto Alegre Default Indicator for individuals broke historical records. The rates totaled 32.1% for Rio Grande do Sul and 34.3% for Porto Alegre, so that both results reached their maximums since the beginning of the survey, in March 2022.
Likewise, monthly variations showed unprecedented growth, due to the increase of 1.5 percentage points for RS and 1.1 pp in POA compared to December 2023. In total there are 2.756 million negative people in the State and 368 .93 thousand in the Capital: 127.8 thousand and 12.3 thousand additional records compared to the immediately previous period, respectively.
CDL POA’s chief economist, Oscar Frank, explains that the significant increase in numbers was not caused by any sudden change in the scenario, but by the incorporation of new data sent by creditor agents to SCPC da Boa Vista/Equifax belonging to the energy sector electrical.
Less indebted companies
The percentages of legal entities with limited credit, check, protest or legal action registered small decreases for RS and Porto Alegre in January, according to the restrictive information base of Boa Vista Serviços SA In comparison with December 2023, the decrease at the state level it was -0.07 percentage points (from 14.48% to 14.41%), while the retraction in the Capital reached -0.02 percentage points (from 15.55% to 15.53%).
If official statistics from the Federal Government are used, the estimated total number of negative CNPJs in absolute terms reaches 198,540 for RS and 34,443 for POA. The chief economist at CDL POA points out that the historical series provides evidence of a break in the upward trend that had lasted since the second half of 2022: “If, on the one hand, the numbers stopped growing, on the other, they remain at high levels. Therefore, signaling involves caution regarding possible investments and hiring made by companies”.
Perspectives for individuals
According to CDL POA’s chief economist, Oscar Frank, it is believed that the balance of risks is relatively positive for the future of default. On the one hand, forecasts indicate that inflation will continue to lose momentum. In turn, employment indicators in Brazil and RS tend to continue recovering. The double combination between robust employment and a certain preservation of the purchasing power of the currency contributes to the generation of income gains for workers.
Taxa Selic
Another extremely important element, points out Frank, concerns the continuation of the Selic Rate reduction cycle. In its latest statement, the Copom recognized the recent progress in prices and openings towards the 3.0% target. Furthermore, the Committee is giving greater weight to the 2025 horizon – a window for which the IPCA projection (3.2%) is lower than 2024 (3.5%) –, remembering that the monetary policy transmission mechanism operates with lag on the real economy. The signal is also that, for at least two additional meetings (March and June), the current rate of cuts of 0.5 percentage points should be maintained.
Furthermore, adds the economist, the extension of the “Desenrola Brasil Program” until the end of March, the correction of the minimum wage above the INPC, the exemption from PF Income Tax for those earning up to 2 MW and the expectation of growth slightly below of 5.0% in RS, in the wake of signs of a grain harvest close to a normal standard and the expected recovery for the industry, constitute favorable vectors.
Slow and gradual improvement
Just as for families, Frank understands that the elements of the current economic scenario corroborate the prospect of a slow and gradual improvement in the default rate of PJ’s. However, the difference for end consumers lies in the fact that companies do not have an outstanding debt renegotiation program of the magnitude of “Desenrola Brasil”.
Wholesale inflation remains well-behaved, according to FGV’s specific thermometer: -5.8% in the last 12 months until January 2024. With regard to sectoral forecasts, agriculture in Rio Grande do Sul stands out, as opposed to the hubs of the Midwest, which are suffering from the El Niño climate phenomenon. In turn, the RS industry should benefit from the Selic Rate reduction cycle and the absence of specific factors that contributed to the sharp drop in 2023, such as the temporary interruption of GM and maintenance of REFAP equipment. Services respond to the solid labor market and social transfers aimed at the poorest.
