By Aluísio Alves and Asher Levine
SAO PAULO, March 12 A declining trend in
consumer delinquencies in Brazil seen over the last year and a
half is nearing an end, credit research company Serasa Experian
said on Wednesday, in the latest sign that rising borrowing
costs and a sluggish economy are hampering the ability of many
Brazilian households to service their debts.
Despite efforts by borrowers to refinance overdraft and
other costly loans, stubbornly high inflation and a climb in
interest rates to the highest level since early 2011 are driving
up debt-servicing costs, Luiz Rabi, Serasa's chief economist,
said in an interview.
In recent months, year-on-year monthly declines in Serasa's
main consumer delinquency gauge have lost steam, suggesting a
reversal of the downward trend in household defaults seen since
the last quarter of 2012, Rabi said. While the central bank's
delinquency gauge is considered Brazil's benchmark, Serasa's
indicator is broader because it monitors payments of bank,
non-bank and utility debts as well as bounced checks.
"Perhaps in March or April the trend will reverse," Rabi
said. "The increase in interest rates is making it tougher for
consumers to honor their bills."
Rabi's remarks also highlight concerns over the
sustainability of a growth model that President Dilma Rousseff
says has helped more than 30 million Brazilians become part of
the middle class. With the economy clearly underperforming, a
potential downturn in job creation could lead to more defaults
among households, Rabi added.
The central bank has raised the benchmark Selic overnight
lending rate eight times over the past year, to 10.75 percent,
in an attempt to head off accelerating inflation. The Selic was
at a record low 7.25 percent before the start of the hiking
cycle in April last year.
According to Serasa, consumer delinquencies fell 2.3 percent
in February on an annual basis. Rabi noted that delinquencies
had fallen 11.9 percent in October, 10.3 percent in November and
6.5 percent in December.
While millions of Brazilians have been hit hard by overdue
bills, lower and middle-income citizens have earmarked more of
their income to servicing debt. According to Serasa, 25.6
percent of Brazilians in the so-called C class owe more in debt
payments than what they earn on a monthly basis.
Citizens within the C class middle-income group earn between
993 and 3,147 reais per month ($421 to $1,333), Serasa said.
Poor financial planning among families and individuals has
left Brazil with higher consumer delinquency rates than those
seen in regional peers such as Mexico and Chile, Serasa said.
Roughly 5.9 million Brazilians were unable to pay off their
consumer loans in 2013, down from 6 million in 2012, according
to Serasa's data.
Defaults are likely to continue hampering creditors and the
economy as long as such a system remains lacking.