Survey indicates that 63.93% of Brazilians have lost monthly income because of COVID-19 pandemic

The Finance Research Center (FGVcef) at Fundação Getulio Vargas’ Sao Paulo School of Business Administration (FGV EAESP) and Toluna, a firm that supplies tailored consumer insights, have carried out a study on Brazilians’ financial situation during the COVID-19 pandemic. In all, 63.93% of interviewees said they have lost income because of the crisis. The largest single share of these people, almost 40%, have lost between 10% and 30% of their income, while 2.61% of people said they have lost all their income. Many of the 36% of people who said their income has not changed are retirees, employees in the formal labor market and government employees.

The survey, which covered 806 people in all regions of the country, also found that the poorest people have lost the most income. The poorest people made up 15% of interviewees who have lost all their income. They also accounted for 15% of those who have lost between 51% and 70% of their income. The highest earners were the most likely to say that their income has not been affected during the pandemic.

Debts

The survey also indicates that most people (56%) have not taken on more debt because of the economic crisis. Among the 44% of people whose debts have grown, this mainly happened because of preexisting debt. The lowest-income people were the most affected by growing debts, while top earners were the least affected.

Divestment

The survey found that during the COVID-19 crisis, people have been selling their investments more than normal. In fact, 42% of respondents said they have done this. This allowed people not to take on more debts. Regarding the type of investment sold, nearly 60% of interviewees said they had withdrawn money from savings accounts, while 15% had sold treasury bonds, 12% had sold certificates of deposit, real estate bonds or agricultural bonds, and 8% had sold stocks.

The survey also found that most respondents had sold up to 50% of what they had invested. Another 15% had sold everything or almost everything. Therefore, it is clear that the crisis has had a major impact on investments. The main reason for this divestment was to pay for expenses during this period of lower income. Almost 60% of interviewees gave this reason. In second place, 21% said they had sold investments to assist family members, and 5.2% said it was because the value of their investments had fallen a lot. This may indicate that they made their investments without properly understanding their risks. Interestingly, 4% of respondents sold investments in order to take advantage of opportunities brought about by the crisis.

Knowledge of investments and future

Most of the respondents said they understand finance. Nearly 55% of them said they have medium or extensive knowledge of money, debt and investment, while 43% said they know little about this or they have started to learn about it during the present crisis. Surprisingly, just 2.24% of interviewees said they know nothing about the subject.

If you had R$10,000 available, what would you invest in?

The interviewees were asked this question, and 20% replied that they would use this money to pay off debts. Somewhat surprisingly, investing in stocks was the second most popular response (and the most popular type of investment), accounting for almost 19% of responses. This was closely followed by savings accounts (18.66%), treasury bonds (15.8%), and certificates of deposit, real estate bonds or agricultural bonds (14.4%). Just 6.59% of people said they would buy multimarket funds (a more complex product) and 5% said they would invest in a pension fund. The popularity of stocks may seem surprising, but there are reasons for this: first, the recent decline in interest rates, and second, the stock market recovery that happened after the steep drop at the start of the crisis. People can also remember 2019, when the Ibovespa benchmark index rose substantially.

Best long-term investment?

Most of the interviewees said that the best choice for long-term investment is stocks (36%), followed by real estate (25%). Pension products also appeared among the responses (9.7%). Thus, more than 70% of respondents are aligned with what is recommended for the long term.

Methodology

The survey was designed by the Finance Research Center (FGVcef) at Fundação Getulio Vargas’ Sao Paulo School of Business Administration and Toluna. It was coordinated by professors William Eid and Claudia Yoshinaga. The goal was to identify changes in Brazilians’ financial position caused by the present crisis.

- Period: Late May 2020.

- Sample: 806 responses in all regions of Brazil, 45% men and 55% women, all over the age of 18. Married people represented 60% of the respondents, while 36% were single, 4.5% were divorced and 0.37% were widows or widowers.

- The participants’ monthly income varies from R$2,005 to more than R$11,262.