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Credit-card debt may threaten Brazil's boom
Posted on 7/11/11 at 6:11 pm
Posted on 7/11/11 at 6:11 pm
Sounds very familiar, and check out the consumer protection:
LINK
Easy credit seems to cause the same cycle of events where ever it becomes available. Interesting article, think I will pass on EM debt.
quote:
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.
Before, people like Xavier, who is 24 and makes about $2,000 a month driving his cab, couldn't get credit. Brazil was beset by hyperinflation in the 1990s and economic turbulence in the early 2000s. When the nation brought its economy under control, banks started expanding credit offers. The number of bank credit cards in circulation has tripled to 150 million in the past eight years.
Economists say many people here are getting credit cards without knowing how to manage the debt. But for those who want to buy things and don't have cash on hand, there is no alternative. The sky-high interest rates mean Brazilians must pay off their cards every month or quickly drown in debt.
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. By the end of the year, the Central Bank expects 28 percent of Brazilians' disposable income will go toward servicing debt, compared with 16 percent in the United States and less than 10 percent in other developing nations.
LINK
Easy credit seems to cause the same cycle of events where ever it becomes available. Interesting article, think I will pass on EM debt.
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