Jonathan Fryer

Brazil’s Credit Card Economy

Posted by jonathanfryer on Friday, 17th December, 2010

Brazil has for some years been the dark horse among the BRICs — the four largest emerging economies. The huge problems of income inequalities and crime have often been cited as reasons why Latin America’s biggest economy would get stuck in the mud. But under the past eight years of rule by President Lula, who steps down at the end of the year, the pessimists have been largely silenced. Of course, the discovery of huge offshore oil reserves has helped. But just as in China, in Brazil millions of people have been lifted out of poverty and the infrastrture is improving. Much remains to be done, that is for sure. But the overall mood is optimistic. Yet there is one feature which many casual observers have missed and which is potentially a cause for concern: the degree to which Brazilians live on credit card debt.It must be the country with the worst addiction to credit cards,which can be used almost everywhere, even for the tiniest purchases.Moreover, in Brazil there is the option to spread one’s credit card payments over several months when purchasing goods and services. I was astounded at the bus station in São Paulo this morning to be asked whether I wanted my bus ticket to Foz do Iguaçu spread out over several months on my visa card! One just hopes that all these Brazilians saddling themselves with credit card debt to fuel the consumer economy won’t go under. Meanwhile, hyper-inflation and devaluation are distant memories. The Brazilian real has strengthened against most major currencies, including the poor pound.

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