Abstract

The Brazilian Financial Housing System is on the verge of virtual insolvency. The conti-nued presence of inflation, coupled with an inconsistent system of debt indexation (the so-cal-led monetary correction), further aggravated both by a plethora of concessions given to the borrowers and by some ill-conceived procedures that were imposed by a sequence of stabiliza-tion plans (Cruzado, Summer and Collor) has resulted in a potential imbalance of USS 20 bil-lions for the Fundo de Compensação de Variações Saláriais — FVCS (Compensation Fund of Wage Variations). Discussing the basic inconsistency of the debt indexation scheme that is still being used, the paper points out the origin of the problem and offers some suggestions on how it could be reduced.

JEL Classification: L74; L78; E31.