Sep 1, 2011
Fears of a credit bubble in Brazil may be overblown. Loan growth remains robust but it is slowing as central bank measures kick in.
by Vincent Bevins
The debate over whether or not Brazil is suffering from a credit bubble has intensified over the last year amid dire warnings that the economy is heading for a drubbing if the problem is not addressed in time. But analysts within and outside Brazil contacted by LatinFinance say that such fears are largely overblown, or at least are best described in other ways.
A credit contraction will have some negative fallout but the country is unlikely to see the dire scenarios envisioned by some doomsayers making comparisons with the US. Those warning about a credit bubble have focused on the argument that debt service burden in Brazil as a percentage of disposable income has already exceeded levels seen in the US before its financial crisis started to unfold.
This may be true and indeed loans as a percentage of GDP have jumped to 46% from 24% just...
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