Brazil’s Personal Loan Default Rate Falls for Fourth Month

Brazil’s consumer-loan default rate fell for the fourth straight month in April as borrowing costs declined in a move that may stimulate banks to boost lending.

The consumer default rate fell to 7.5 percent in April from 7.6 percent the month prior, the lowest level since November 2011, the central bank said in a report distributed today in Brasilia.

“We are starting to see the results of favorable labor market conditions,” Jankiel Santos, chief economist at Banco Espirito Santo de Investimento, said in a telephone interview from Sao Paulo. “With this decline, banks start to feel more comfortable giving credit.”

President Dilma Rousseff’s administration has taken steps including reducing reserve requirements and encouraging lending to fuel consumption after the economy grew at its weakest pace since 2009 last year. Brazil’s investments have been growing since the fourth quarter and family consumption remains robust, central bank President Alexandre Tombini said on May 21.

Policy makers in April increased the benchmark interest rate by a quarter-point from a record low 7.25 percent after inflation accelerated at the fastest pace in over a year. Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, rose four basis points, or 0.04 percentage point, to 8.59 percent at 10:47 a.m. local time.

Brazil’s total default rate was unchanged from March at 5.5 percent. The company loan default rate rose to 3.7 percent in April from 3.6 percent in March.

The average rate on consumer loans decreased to 34.4 percent from 34.5 percent a month earlier, the lowest level so far this year.

Outstanding credit expanded 1.1 percent in April from March to 2.45 trillion reais ($1.20 trillion), the central bank said.

Brazil’s $2.5 trillion economy will expand by 2.98 percent this year, according to the latest central bank survey of about 100 economists. That compares to the central bank’s forecast of 3.1 percent growth.

The real weakened 0.2 percent to 2.0484 per U.S. dollar.

To contact the reporter on this story: Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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