For Luis Carlos Mendonca de Barros, managing partner at Quest Investimentos and Brazil’s former communications minister, the speed of the increasing supply of consumer credit in Brazil is an unsustainable process and impossible to be replicated this year.

“It’s a bubble, just see how quickly the levels of credit have increased,” the economist said in an event. ”It is important to understand what we’ve been going through right now, because the government clearly does not understand it as it is trying to replicate a very rapid growth curve for consumer credit,” he said.

According to him, Brazil is beginning to realize that there is a maximum speed of growth. ”We can discuss whether it is 2.5% or 3.5%, it is somewhere around that. But you must tell this to the government, because every year they talk about 5% growth,” he said.

The economist pointed out that Brazil has gone from a country without credit to a nation with credit levels that compare to the United States. ”But our society’s income growth can sustain only 3% or 4% per year of credit growth,” he said.

Mendonca de Barros also mentioned the change in credit ownership from the public to the private sector. ”The share of credit by the public sector has dropped in half in the last 15 years. This shift changes the game as you have more private credit, which is a “good cholesterol” in the economy,” he said.

“This is a sign of wealth, but it is a new source of trouble,” said Mendonca de Barros.

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7 Responses to “Brazil’s credit expansion is a bubble but the government doesn’t get it” says former minister Mendonca

  1. Joseph Armagh says:

    Mendonça is intelligent, but unfortunately a crook as all the other previous ministers. His son made several millions (in the hundreds) when he was a minister and the son was with a brokerage…Talk about timing : )

  2. KB says:

    I am not used to read Mendonça. I dont pay a dime to his opinion. Who tracked his performance knows that he led Planibanc to bankruptcy in the 80′s. To say the least. Nevertheless, I agree with him that Brazilian economic model focused on consume without any economic reforms will fail inexorably. To make matters worse the authorities want to solve structural problems with more and more interference in the economic field. This will create huge distortions. Meanwhile reforms will not come. They are playing to the audience. If I were a foreign investor I would open my eyes.

  3. Leo says:

    Oh, isn’t that the guy that made millions when Brazil privitised Telebras? His Bro, also involves, was kicked out of his position in the chamber of commerce when that happened… That is usually how it goes in Brazil: you still a couple hundred million usd and get away with a slap on the hand (as long as you stole enough cash to buy a couple of judges). Himself, Serjao (already burning in hell), André Lara Resende… Tutti buona genti.

  4. Leo says:

    BTW, “…credit levels that compare to the United States”. It would be good if he quoted a couple of sources… You gotta be pretty hammered to say something like this.

  5. Brazilian Bubble says:

    Leo, agree with you. But I think he was talking about personal credit, the so-called “debt-service ratio” which compares overall debt to income.
    Best, BB

  6. Oraculo de Ipanema says:

    Interesting opinion. Not-so-clever comments from readers.
    I guess the intellectually-challenged crowd like to blab about their biased opinion.

  7. klare says:

    HE IS RIGHT! Credit expansion will make Brazil more close to the failure policies of the ‘Western World’ Economy&will put Brazil into a DEBT Slave system again!Why Brazil does not trade without dollards?!

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