Brazil’s Consumer Default Level Rises as Interest Rates FallMatthew Malinowski and Raymond Colitt
Brazil’s consumer-loan default level rose in December, even as interest rates continue to fall to record lows in the world’s second-largest emerging market.
The consumer default rate rose to 7.9 percent from 7.8 percent in November, the central bank said in a report distributed today in Brasilia. The company loan default rate declined to 4 percent from 4.1 percent a month ago.
President Dilma Rousseff’s government has stepped up measures aimed at expanding credit in Brazil’s $2.5 trillion economy, which experienced a second year of declining growth in 2012. After cutting the benchmark Selic rate to a record low and pressuring banks to reduce lending costs earlier in 2012, policy makers in December extended credit lines to the country’s construction industry and lowered reserve requirements for some banks. Central bank President Alexandre Tombini said in Davos on Jan. 23 that domestic demand continues to grow at dynamic rates.
State-owned Caixa Economica Federal is among the banks that have implemented new measures to facilitate lending. Last week, Caixa cut rates on real estate financing above 500,000 reais ($246,269), the bank said in an e-mailed statement.
Brazil’s average rate on loans fell in December to a record low of 28.1 percent from 28.9 percent in November. Average rates on consumer loans declined to 34.6 percent from 34.8 percent a month earlier. Rates on corporate loans dropped to 20.6 percent from 21.7 percent.
Outstanding credit rose 2.4 percent in December from November to 2.4 trillion reais ($1.9 trillion), the central bank said today. Credit increased 16.2 percent from a year ago.
Recent indicators show growth in the world’s sixth-largest economy has remained uneven. While retail sales increased in November for the sixth straight month, industrial production in November fell for the second time in three months. The recovery in domestic activity has been “slower than expected,” the central bank said in the minutes to its Jan. 15-16 monetary policy meeting published yesterday.
Consumer demand and lingering effects from food price shocks are fanning inflation, which has remained above the central bank’s 4.5 percent target since August 2010. Consumer price increases reached an annualized 6.02 percent through mid-January, the national statistics agency said Jan. 23.
Brazil’s interest-rate futures market is closed today for a holiday. The real was little changed at 2.0302 per U.S. dollar at 10:51 a.m. local time.
The central bank on Dec. 20 cut its 2012 growth forecast to 1 percent. That’s down from growth of 2.7 percent in 2011 and 7.5 percent in 2010.