News headlines this morning about Brazil consumer’s debt caught everyone’s attention.
For the first six months of this year, the number of Brazilians in default was up 22 percent from the same period in 2010, the biggest jump in nine years, credit rating agency Serasa Experian said Monday. Private economists say one in 10 Brazilians is in default.”
Wow, this is serious… 1 in 10 brazilians is in default! I guess the sentence below explains one of the reasons:
“The interest rate on credit cards in Brazil’s financial hub of Sao Paulo averages 238 percent, according to a study conducted earlier this year by Fecomercio, a federation of commerce. That means carrying a balance of $1,000 for a year results in a $3,380 tab. That cost is expected to rise, with the Central Bank of Brazil likely to raise interest rates to battle inflation.”
The article goes on to describe Xavier the cab driver:
“Xavier is one more debtor adding to fears that the economic boom in Brazil may be partly built on a bubble in personal credit, even with interest rates on credit cards often topping 200 percent. Economists worry that if it pops, it could severely damage an economy that has come through the global downturn better than almost every other nation. “The amount I owe keeps growing. I pay, but I can’t stop this snowballing of the debt. The interest each month is too high,” said Xavier, pointing to the latest credit card bill, showing he still owes $2,200. “I’ve tried to learn from hard experience how to better manage my debt, but I’m too far behind.”
Full article here

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