MercoPress. South Atlantic News Agency
FT warns Brazil could be approaching a “US like sub-prime” situation
The Financial Times warns that in spite of the current optimism about the performance of the Brazilian economy, the country could be heading to a ‘sub-prime’ crisis ‘worryingly’ similar to that experienced by the United States. Read full article
Comments
Disclaimer & comment rulesFT must not ignore UK !
Feb 22nd, 2011 - 11:16 am - Link - Report abuse 0nor the USA!
Feb 22nd, 2011 - 04:25 pm - Link - Report abuse 0the USA needs help, let's not give them a helping hand :)
Feb 22nd, 2011 - 04:34 pm - Link - Report abuse 0As far I know, Brazilian banks never and don't lend to unemployed Brazilians. You need a job to qualify for a loan, and all are risky. Big deal, if they fail, let them fail. It seems that the FT doesn't understand the Sub-prime mortgage (though it was less than 5% of the whole mortgage scam in the US). Sub-prime mortgage was primarily lend to unemployed/ people with bad credit history for extreme non fixed low interest rates that they could jack up to extremely high interest rates ( example, from 0% for one year to 15%,20% and higher and higher..boom, crab land/ house and resell). FT should indeed pay more attention to the British economy where most of the people pay their rent or mortgage with their CREDIT CARD. That's like being middle in the ocean and drinking the sea water. We all know how that will end.
Feb 22nd, 2011 - 09:16 pm - Link - Report abuse 0Also, Fido, banks see that credit never surpasses 30% of the borrower's disposable income. The FT article says that default might increase this year because it is expected that the Central Bank will increase the basic interest rate to control inflation. But actually interest rates on credit in Brazil, in contrast to what happens in the US, don't vary according to the Central Bank's basic interest rate. They are negotiated with the borrower before he takes the credit, and thus don't have no correlation with the market's whims. An article on a Brazilian newspaper pointed out that, because interest rates are so high, banks can already derive good profit from standard operations. They don't have to venture in riskier operations.
Feb 23rd, 2011 - 03:55 am - Link - Report abuse 0”.. But in Brazil the problem is that with a manageable 6% inflation, Brazilian banks charge an average (punitively expensive) lending rate of 25% and in consumer lending 30%. This means real interest rates between 20/25% compared to 1 to 3% in most countries.
Feb 23rd, 2011 - 11:59 am - Link - Report abuse 0The ramifications are serious as the debt service burden has risen to 24% of disposable income and is set to rise further as rates push higher” and could reach an ‘exorbitant 30% by 2012’...”
I fear, not for myself, but for our maid's family and the many, many like her:
They have around '3 minimum incomes' and three children - just outside the Bolsa range. They have borrowed to the hilt to (in this case) buy a car to use for income generation. They are on the knife-edge of financial survival/collapse every day, needing employment income every day of the year to avoid forclosure. This is difficult because of ilness, family ilness and pregnancy.
This new 'middle class' can collapse into penury at a moment's notice because their education and knowledge of simple maths and financial management is generally no higher than that of a primary school child.
Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!