BRASILIA Brazil's government announced on Friday that it would initiate a debt renegotiation program with Treasury guarantees in September for lower-income individuals, fulfilling one of the campaign promises of leftist President Luiz Inacio Lula da Silva.

According to credit bureau Serasa, about 71.9 million Brazilians have been blacklisted in Latin America's largest economy after the pandemic and high borrowing costs to tame inflation strained families' budgets.

The first phase of the comprehensive renegotiation program "Desenrola Brasil" will kick off on Monday, said the Finance Ministry.

During this phase, banks will forgive debts up to 100 reais ($20.9) and provide customers with incomes of up to 20,000 reais the opportunity for direct debt renegotiation without any value limitations.

There will be no contribution from the Treasury, but to encourage negotiation by banks, the government will offer financial institutions a regulatory incentive to increase credit availability, allowing the use of presumed credits totaling approximately 50 billion reais.

According to the ministry, about 30 million people could benefit from this initiative.

The renegotiation for the public with income up to two minimum wages, equivalent to 2,640 reais ($552), will begin in September, the ministry said. In these cases, the renegotiation will have government guarantees for financial and non-financial debts up to 5,000 reais.

This phase is deemed the heart of the program and is considered more complex as it requires the government to structure a platform centralizing data on consumer debts to coordinate discounts from creditors.

The government stated that the program aims to combat the delinquency crisis in the country "in a scenario where interest rates have radically changed."

The central bank has maintained its benchmark interest rate steady at a cycle-high of 13.75% since September, drawing frequent criticism from Lula.

($1 = 4.7824 reais)

(Reporting by Marcela Ayres; Editing by Steven Grattan)