Brazil’s problems of poverty, crime and inequality remain significant. But Brazilians are cheerful, and with good reason: their boom has lifted millions out of poverty, and their impressive business performance has seen the nation grow as a global force. But this leads to a common conversation: how long will the party last?
It is a reasonable question, because there is no doubt that Brazil’s economy is overheating. And while its economic successes have not yet resulted in a financial bubble, they soon could. Paradoxically, it is the reasons for the country’s success that are now the most important sources of concern.
Over the past five years, credit has grown enormously and is now as large as 45 per cent of the economy. Brazilians have thus been able to borrow money, many for the first time, to buy homes, motorcycles, refrigerators and other consumer goods. They don’t seem to mind that the interest rates on these loans are the second highest in the world, or that Brazilian families today devote a fifth of their income to paying off their debts.