By: Leonardo Neri

Initially, as we know, President Luiz Inácio Lula da Silva (“Lula”) was president of Brazil from 2003 to 2010, a time when he brought new changes and implementations to his government.

In view of this, this article will exclusively address changes related to the expansion of consumer credit, with a focus on legal impacts, since this subject will gain a lot of attention in the coming year, considering its importance and impact on the market, as it is directly linked to the country's economy, given that the aforementioned implementation was carried out by President Lula, who will return to power in 2023.

For context, the increase in credit operations implied an increase in the spending capacity of both individuals and legal entities. In view of this, drawing a brief parallel between the years 2003-2010, it is possible to verify a large increase in credit with free resources to individuals, which resulted in an improvement in financing conditions (extending the term and reducing the interest rate applicable to these segments), as well as to legal entities, which were provided with free resources for operations with fixed and floating interest rates.

Thus, in summary, it can be seen that the expansion of credit was due to a series of factors. These factors directly affected the supply of credit by banks and created the necessary conditions for the financial system to respond to the growing demand for credit. Subsequently, public banks supported the ongoing process of credit expansion and actively participated in the federal effort to overcome the effects of the worsening economic crisis on the Brazilian economy.

That said, it is clear that the Lula government was marked by the resumption of credit expansion in Brazil, which is why the subject has been guiding many debates and discussions for the coming year.

It is worth noting that credit operations in the financial system in the previous period registered a significant expansion. This occurs because the increase in demand directly appeals to a greater number of interested people, thus providing a significant increase in consumption, given the good conditions.

Thus, in a conclusion based on the legal world, it is clear that, with the increase in demand, there will also be an unquestionable increase in adhesions/purchases, and possibly an increase in people who end up getting into debt, given the impulsive purchasing behavior of consumers.

As a result, legal demand has increased significantly, both on the consumer front, seeking to defend the rights of consumers, who at some point may feel weakened and vulnerable due to possible acts by the Supplier/Trader, as well as in an increase in executions, in which many people end up getting into very high debts, and for not fulfilling their financial commitments, they end up being executed by creditors, who seek to receive the debt due.

In this interpretation, it is concluded that the expansion of credit is economically satisfactory, considering that, with the increase in sales, the economy gains turnover. With turnover, there is a greater opening of credits, which provides growth in consumption. However, from a legal perspective, it is possible that demand grows, possibly intertwined in two major causes, namely: (i) excessive consumption; (ii) disrespect for the consumer.

As previously explained, excessive consumption is a reflection of the consumer's lack of control, who makes purchases without the financial means to support it. Disrespect comes from the greater number of purchases, which can generate greater expectations and dissatisfaction among the consumer. Therefore, it is clear that there may be an increase in causes in the legal world, given the continuity of the work that was carried out during the years 2003-2010. For more information on the subject, as well as to investigate the possible impacts on the legal world, please contact the partner in charge Leonardo Neri.

With the collaboration of Barbara Gomes