Opinion

How sky-high interest rates are choking economic growth in Brazil

credit card interest rates brazil
Credit card interest rates get to 300% per year in Brazil

Despite ranking as the ninth-largest economy in the world, Brazil hasn’t been on par with other emerging economies when it comes to GDP growth rates. In recent years, the Brazilian economy has flatlined. For the sake of comparison, United States GDP is roughly ten times the size of Brazil’s and continues to grow at a faster rate. India’s GDP, similar to Brazil’s, is growing three times faster. How do we explain this discrepancy?

Brazil remains insular, with 85 percent of its GDP based on domestic consumption and industry. International trade represents only 15 percent of the total economy. The world mistakenly regards Brazil as a commodities country, due to the overrepresentation of commodity sectors on the São Paulo stock exchange.

In reality, the Brazilian economy is fairly similar to the U.S. economy, where domestic consumption rules GDP growth. However, unlike U.S. consumers, Brazilians have very limited access to fairly priced credit.

Over-expensive credit

Credit cards and installment credit are widespread, with over 77 percent of households exposed to them in some way. Over 60 percent of e-commerce is paid for in installments, and 64 percent of Brazilians cannot afford to make purchases without spreading the payments over several months.

And while the Central...

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