Odete Meira da Silva’s debt woes help explain why Brazil’s once-dazzling growth has fizzled and isn’t expected to blast off again soon. Most people think of Brazil—among the world’s biggest producers of iron ore and soybeans—as a poor country that lives or dies on sales of commodities. But aspiring shoppers like Ms. Silva fueled much of the country’s recent boom, as consumer loans more than doubled to around $600 billion in five years.
Now, many of these new shoppers are suffering from credit-card fatigue—or worse. Some are defaulting on Brazilian credit cards that can charge 80% annual interest or more. Facing more defaults, banks are now warier about lending.
As a result, consumption is expanding at its lowest rate since 2004. That is compounding other problems, including weaker exports to China and a manufacturing slump caused by a strong currency, that were already slowing Brazil down. With consumer confidence declining, Brazil’s gross domestic product is expected to post 2.4% growth this year, after reaching 7.5% in 2010.
Read our page one story here: Debt Woes Help Explain Why the Country’s Once-Dazzling Growth Has Fizzled