Surge in gambling among Brazil’s low-income population raises concerns

Jenny Ortiz September 30, 2024

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Surge in gambling among Brazil’s low-income population raises concerns

Brazil is experiencing a rise in the use of its instant payment system, Pix, for online gambling, with transactions increasing by over 200 percent since January 2024. According to local reports, the Central Bank of Brazil has identified this surge as a potential warning sign of declining credit quality, particularly among low-income groups, including those receiving Bolsa Família, a social assistance programme. The rapid growth in gambling activity raises concerns about the potential for increased personal debt and default risks, especially among vulnerable populations.

The Central Bank has drawn a strong link between Bolsa Família recipients and the rise in online betting. The average transaction size has grown considerably, exacerbating fears of long-term financial instability. Many low-income individuals, driven by the allure of quick financial gains through gambling, may face worsening debt situations as a result.

Economic impact and inflation concerns

In addition to concerns over the rising gambling trend, Brazil’s Central Bank is keeping a close eye on the country’s economic trajectory. Inflation continues to be a major challenge, made more difficult by better-than-expected economic growth and low unemployment rates. While these factors are usually positive indicators, they are contributing to inflationary pressures, diverging from the Central Bank’s targets.

Brazil’s economy is currently expanding at a rate slightly above its potential, with the Central Bank predicting a slowdown in government spending due to new fiscal rules. However, this has not fully alleviated concerns over fiscal transparency, as recent risk premium increases reflect uncertainty around data transparency rather than actual spending growth.

Insight from the Central Bank’s betting market study

Last week, the Central Bank released an in-depth report on Brazil’s online betting industry, aiming to assess the size and scope of the market. Commissioned by Senator Omar Aziz, the study revealed challenges in tracking the gambling sector, as many companies operate under obscure or misclassified names. This lack of transparency makes it difficult to evaluate the full extent of the industry.

In August 2024, Brazil’s online betting sector saw nearly BRL21 billion (€3.45 million) transferred to gambling companies, highlighting its rapid expansion. However, many of these companies remain unlisted in official economic sectors, complicating regulatory efforts. The study estimates that around 15 percent of bets are retained by gambling platforms, while the remainder is distributed as prizes to bettors.

Profile of gamblers

The Central Bank’s report also provides insight into the demographics of Brazil’s gamblers. Many participants are between 20 and 30 years old, with an estimated 24 million people engaging in online gambling during the analysis period. The data shows that 17 percent of Bolsa Família beneficiaries were involved in gambling activities in August 2024. The average monthly spending on bets varied significantly, ranging from BRL100 (€16.44) to over BRL3,000 (€493.48) depending on age.

The report highlights the vulnerability of low-income families to the allure of online betting, as many may view it as a potential avenue for financial improvement. Over 5 million individuals from Bolsa Família households reportedly transferred RBL3 billion (€493.5 million) to gambling companies in just one month.