http://www.ft.com/cms/s/0/3186742e-a24e-11e0-bb06-00144feabdc0.html#axzz1R6djX1y2
Back in February, in an earlier Insight column, we highlighted the major build up of consumer debt at extremely high rates of interest, putting a significant cash flow burden on the repayment capacity of borrowers.
Since then, the situation has deteriorated further. Pressures are building in the Brazilian credit cycle.
We calculate that the debt service burden for the so-called “middle class” in Brazil has now breached 50 per cent of disposable income, as high income earners have little need to borrow at rates which are punitive and most of the consumer credit is therefore being directed to the “middle class” for consumption.
Without these buildings blocks we are afraid that Brazil will be exposed to significant boom-bust cycles. Unfortunately, we are currently at risk of transitioning from a boom to bust.
Back in February, in an earlier Insight column, we highlighted the major build up of consumer debt at extremely high rates of interest, putting a significant cash flow burden on the repayment capacity of borrowers.
Since then, the situation has deteriorated further. Pressures are building in the Brazilian credit cycle.
We calculate that the debt service burden for the so-called “middle class” in Brazil has now breached 50 per cent of disposable income, as high income earners have little need to borrow at rates which are punitive and most of the consumer credit is therefore being directed to the “middle class” for consumption.
Without these buildings blocks we are afraid that Brazil will be exposed to significant boom-bust cycles. Unfortunately, we are currently at risk of transitioning from a boom to bust.
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