Brazilian consumer debt

The average rate of interest on consumer lending has jumped from 41 per cent in 2010 to 47 per cent most recently in May 2011. This rise from an already elevated level reflects the cumulative effect of tightening by the Brazilian central bank in order to contain inflation.

The consumer debt service burden, which stood at 24 per cent of disposable income in 2010, is now slated to rise to 28 per cent in 2011.

This compares with 16 per cent for an “overburdened” US consumer and a mid-single digit reading for other emerging markets such as China and India.

In short, the cash flow burden is astronomical and rising.

We calculate that the debt service burden for the so-called “middle class” in Brazil has now breached 50 per cent of disposable income…

Read more here.  Loan delinquencies, by the way, are rising, and that is in a rapidly growing economy.  Is it a good or bad thing that their real interest rates are twelve percentage points higher than in some of the wealthier nations?


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