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Inflation worries in Brazil

As prices mount, economists predict rising defaults on consumer debt

As rising inflation squeezes consumers in Brazil, economists here are beginning to worry that a wave of defaults on consumer debts is on the way, Agencia Brasil reports.

Economist Carlos Henrique de Almeida said this year’s default rate on consumer borrowing is expected to reach a record 8 percent, up from 6.3 percent in 2010. “Any increase in defaults is not good news," he told Agencia Brasil. Because new access to credit for lower-middle class Brazilians has helped fuel this country's economic boom, a rise in defaults could set back more than just the consumers who can't pay their bills.

And, as the Financial Times points out, Brazil's central bank has so far only taken incremental steps to address the problem – gradually increasing baseline interest rates. Top Brazilian officials, including President Dilma Rousseff, have also made speeches, too, vowing to get tough on rising prices. But “If global fuel and commodity prices stay high and the Brazilian labour market tight,” the FT reported, “words alone will not fix the problem.”

http://www.globalpost.com/dispatches/globalpost-blogs/bric-yard/inflation-worries-brazil

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