By Nathaniel Archer Lawrence
[5 min read]
When I tell Brazilians I teach financial education, nearly without fail their first response is, “Oh, I need that.”
Brazil finds itself almost a decade into an existential economic crisis. The “social-democratic” darling of BRIC countries in 2010, Brazil has spent the better part of this decade suffering. From the deepest recession in a century to unending political corruption scandals, Brazilians were unprepared for such a financial challenge. This is exactly what financial education strives to correct – at least, on paper – and what Brazil needs.
When it comes to financial education, Brazil has actually taken clear and laudable policy steps. In 2010, the Presidential Decree 7,397 established the National Financial Education Strategy (ENEF). Since then, the number of financial education programs has grown to nearly 1,400, including its adoption into the national public-school system. Clearly, Brazilian policymakers believe in financial education, and that is a good sign.
Contrast that, however, with the second lowest savings rate across 30 OECD countries, a 3% rate of life insurance ownership, and over 62 million delinquent borrowers—41% of the population  . For every R$100 Brazilians earn, they already owe R$43. They apply 20% of each paycheck to debt, and 33% of households already hold more debt than they will earn this year  .
This raises a frustrating question for me as a financial educator: how does a population so demonstrably committed to financial education continue putting its foot in its mouth?
My experience and research suggest that the answer in part lies in this very question. Brazilians don’t need financial education per se; in fact, I tend to prefer a different term. Brazilians need financial training.
This may sound like more semantic fussiness than a groundbreaking solution, but as its 1,400 programs reflect, Brazilians simply do not lack financial education. They lack prerequisite guidance to make financially healthy decisions.
This is not a governmental or public failing, a negative reflection on the Brazilian people, or even an issue unique to Brazil. I see few populations demonstrating these prerequisite skills and fewer training them. That being said, though, I do find Brazil an acute case given its severe recession, high economic inequality, and – in particular – tumultuous historical relationship with money.
Between 1940 and 1994, Brazilians used eight different currencies. Accelerating inflation, culminating in a fifteen-year period of hyperinflation in the 1980s and early 1990s, resulted in the rollercoaster graph below.
Source: Instituto Brasileiro de Geografia e Estatística. (2017). Índice Nacional de Preços ao Consumidor Amplo – IPCA. Retrieved November 6, 2017, from https://www.ibge.gov.br/estatisticas-novoportal/economicas/precos-e-custos/2210-np-indice-nacional-de-precos-ao-consumidor-amplo/9256-indice-nacional-de-precos-ao-consumidor-amplo.html?t=h
Between currency changes, Brazilians had to survive in an economy where prices randomly skyrocketed and paychecks could lose their value in a month, or even a day . At one point, the price of margarine jumped to Cr$43,000 (roughly US$3.95) . While current financial education would tell you not to spend your month’s wage in a single shopping spree, in 1980s Brazil this was how you survived. It was economic rationality in a funhouse mirror.
When in 2013 I first started working with Rio de Janeiro’s micro business owners to help them improve their financial health, I was constantly left scratching my head at their financial arithmetic. Holding R$200 in their hands at the end of the day, they would explain they’d profited R$200, even when I had watched them spend R$250 on supplies that morning. The issue was not that they couldn’t subtract two numbers. Rather, it was reasoning that said some abstract, intangible “negative R$50” cannot buy groceries, “but this R$200 can and will.” They would then spend it immediately, converting their liquid asset into tangible value. In hyperinflation, value can only be tangible.
Only when I studied Brazil’s history of inflation did this consumption reflex make sense. This had been rational behavior, ingrained over the course of a generation. How could they possibly trust the savings-focused financial education I was trying to teach when they’d survived by not trusting money?
Given Brazil’s economic trauma, how can we educators help Brazilians achieve greater financial health?
As many Brazilians attest and the financial investment data reflect, they do not think long-term. They don’t spend long-term either. Among many complicating socioeconomic, historical, and cultural variables, Brazil’s challenge is that the psychological impact of hyperinflation reverberates across all income levels. This consumption reflex that Brazilians developed permeates economy-wide decision-making, by both consumers and institutions.
Thus, Brazil needs a different approach than financial education. Rather than learning the definition of “checking account” and how to use a cash flow template, Brazilian people and businesses need to develop new financial reflexes for the starkly more stable economic reality they now exist in: a mindset geared to considering multiple time horizons and not just immediately seeking tangible value.
Just as one doesn’t ultimately learn to drive a car in a classroom, neither can we expect Brazilians to learn new reflexes in such a disconnected environment. We must come to them, providing appropriate training and tools to help them build a more solid financial future. This requires both convenient, appropriate technology as well as effective pedagogy.
It also requires recognizing that poor financial decisions are a part of life and that learning to mitigate them is an equally important skill. During my six years in Brazil, living across all income levels, the lowest to the highest, I always heard the same reaction to my profession: “Financial education? Oh, I need that.”
My response to them is that I tend to think I do, too.
 Ramos, A., Mateus, P., & Fritsch, G. (2019). Latin America Economics Analyst: Brazil Two Lost Decades in Forty Years — Could it Lose Half a Century? New York: Goldman Sachs.
 Associação de Educação Financeira do Brasil. (2018). Mapeamento de iniciativas de educação financeira: Abril/2018.
 Atkinson, A. (2016). OECD/INFE International Survey of Adult Financial Literacy Competencies.
 Cerca de 62,6 milhões de brasileiros fecharam 2018 com o nome sujo, diz SPC. (2019, January 15). UOL.
 Banco Central do Brasil. (2019). Time Series Management System: Public module. Retrieved April 12, 2019, from https://www3.bcb.gov.br/sgspub/localizarseries/localizarSeries.do?method=prepararTelaLocalizarSeries.
 FecomercioSP. (2019). Pesquisa de Endividamento e Inadimplência do Consumidor. Retrieved on April 12, 2019 from http://www.fecomercio.com.br/pesquisas/indice/peic.
 Banco Central do Brasil. (2004). Dinheiro no Brasil (2nd ed.). Brasília: BCB.
 Instituto Brasileiro de Estatística e Geografia. (2018). Índice Nacional de Preços ao Consumidor Amplo – IPCA. Retrieve on March 15, 2018 from https://www.ibge.gov.br/estatisticas/economicas/precos-e-custos/9256-indice-nacional-de-precos-ao-consumidor-amplo.html?=&t=o-que-e.
 Hiperinflação era isto: margarina a 43 mil e aparelho de som por 6 milhões. (2017, April 12). UOL Economia.
Nathaniel Lawrence is a researcher at the Núcleo Interdisciplinar de Educação Financeira at the Pontifícia Universidade Católica do Rio de Janeiro and the founder of Blue Economic Solutions, a company that provides training to microbusinesses in Brazil’s low-income communities.
Credit Featured Photo: Free license (Pixabay)