Credit levels in Brazil reach a record
Credit is a problem in Brazil. Factors like: lack of capitals; a law which overprotectes debtors and underprotects creditors; high interest rates, among others, have been preventing a growth of credit in Brazil.
This week, the total volume of credits in Brazil reached R$ 1 trillion (about US$ 600 billion), the highest volume in the History of the country; that volume amounts to 36% of GNP, also the highest figure ever.
The graph below shows the total credit as percentage of GNP over the past few years.
It is noticeable that credit has been growing very fast. The reasons are the opposite of the factors mentioned in the top paragraph: there is an abundance of capitals (foreign investors are bringing large amounts of money into the country); laws are being passed to safeguard the creditors (for example, specific laws have been giving protection to banks which loan money for purchase of vehicles and real estate); interest rates have been falling.
And, as São Paulo has the biggest economy in Brazil, a good part of that credit was directed to people in the State. And the consequences are visible: the market for cars is hot, and the traffic jams are getting worse; real estate prices are reaching new record levels; the poorer classes (which never had credit before) are buying stuff like computers, TVs and the like, making their lives happier and increasing the popularity of President Lula in the process.