Brazil Consumer Default Rate Falls First Time Since March

Brazil’s consumer-loan default rate fell in June for the first time in three months, as the government’s drive to lower borrowing costs provides relief to indebted families, Bloomberg Businessweek reported. The consumer default rate declined to 7.8 percent from a revised 7.9 percent in May, the central bank said in a report distributed today in Brasilia. The company loan default rate slid to 4 percent from 4.1 percent over the same period. Lower interest rates, higher income levels and a more conservative selection process by banks have caused default rates to fall, the central bank’s head of economic research, Tulio Maciel, told reporters in Brasilia today. Since August, Brazil has cut the benchmark Selic rate 450 basis points to the record low 8 percent and pressured banks to lower rates on loans to accelerate a sluggish economic recovery. Easier credit access, a drop in delinquency rates and record-low unemployment will help drive consumption in the world’s second- largest emerging market, central bank President Alexandre Tombini told reporters July 23. Policy makers have also implemented growth measures such as tax breaks on automobiles and consumer goods. “Private credit is still growing robustly,” John Welch, macro strategist at CIBC World Markets, said in a telephone interview from Toronto. “Brazil is not suffering from a lack of demand.” Read more.