Lula's consumer debt vow snagged in talks with Brazil private sector, sources say

By Marcela Ayres and Bernardo Caram BRASILIA, March 13 (Reuters) - Brazilian President Luiz Inacio Lula da Silva's vow to renegotiate consumer debts has missed deadlines due to a series of technical issues and open questions about the role of the private sector, six people involved in the talks told Reuters. The so-called Desenrola program, first scheduled for launch in February and then early this month, has now been delayed indefinitely according to the sources, who requested anonymity to discuss confidential government deliberations. The program aims to provide relief for some of the 70 million Brazilians blacklisted due to unpaid bills after interest rates climbed to a six-year high. It faced skepticism from the finance sector during last year's presidential campaign. The Finance Ministry did not respond to request for comment. Last week, Finance Minister Fernando Haddad said the program should allow some 37 million people to renegotiate some 50 billion reais ($9.5 billion) in debts. During the campaign, advisers said they aimed to tackle up to 95 billion reais of unpaid bills. Last week, Haddad attributed the program's delays to the development of a digital platform for debt renegotiations. Four ministry officials said discussions about the platform had not reached a consensus about its design or functionality. Another source familiar with the matter said there was still debate about the composition of a working group including government officials, banks, creditors and credit bureaus to iron out details. With input from that group, the government should be able to implement the program in the second half of the year, this source said. "Will people access a website? Where will this website be? How will they find out how much they owe and to whom? This is not well-designed," said the source. Also yet to be determined is the cutoff date for debts eligible for renegotiation, meant to prevent people from deliberately defaulting on current payments. Officials are also looking at how to structure auctions with creditors such as banks, retailers and utility companies, which would define which proposals qualify for guarantees from a federal fund of 10 billion reais in the renegotiation process. In theory, banks would then settle debts directly with other creditors and work out a payment plan on the reduced debt load with individuals, offering more favorable terms such as 2% monthly interest over five years, for example. Sources said the dynamic of those negotiations and specific terms are still being defined for a first tier of the program, addressing debts of up to 5,000 reais for individuals earning up to two times the minimum wage per month, or 2,600 reais. In the second tier of the program, debts of any value from individuals of any income could be negotiated without government guarantees, generating additional uncertainty about the viability of these operations for financial institutions.

($1 = 5.2619 reais) (Reporting by Marcela Ayres and Bernardo Caram Editing by Brad Haynes and David Gregorio)