Brazil Default Rate At 30-Month High Raises Doubt On Economy

Brazil’s consumer loan default rate rose to the highest in 30 months, reinforcing concerns that households struggling with debt could further dent Brazil’s credit-driven growth model. The consumer default rate in May rose to 8 percent, from a revised 7.8 percent in April, the central bank said in a report distributed today in Brasilia. The default rate on company loans remained unchanged at 4.1 percent, Bloomberg reported. “This does not bode well for economic recovery,” John Welch, macro strategist at CIBC World Markets, the investment- banking branch of Canada’s fifth-largest bank, said by telephone from Sao Paulo. “Bringing down interest rates and pushing credit won’t lead people to borrow more, they’ll just refinance their loans.” In just over a month, analysts have shaved more than one percentage point off their 2012 growth estimate for Brazil, lowering it to 2.18 percent, according to a central bank survey released yesterday. Economists predict the second-biggest emerging market after China will slow for a second straight year even as the government has cut interest rates to a record low, granted tax breaks on industrial and consumer goods and provided more subsidized credit. The economy grew 2.7 percent last year after expanding 7.5 percent in 2010. Read more.