Brazil loan defaults jump to 17-month high

BRASILIA/SAO PAULO: Loan defaults in Brazil rose in July to their highest in 17 months in a further indication that higher borrowing costs and an economic slowdown hampered the credit-worthiness of consumers and companies in Latin America's largest economy.

Loans in arrears for 90 days or more rose to the equivalent of 5.2 percent of outstanding loans in July from 5.1 percent in June, the central bank said on Wednesday. The level is the highest for the indicator, known as the default rate, since the 5.3 percent reading in February 2010.

The rise in defaults came along with a decline in the pace of new loans in Brazil last month, the report showed. Outstanding loans in Brazil's banking system rose 1.1 percent in July from June, totaling 1.854 trillion reais ($1.16 trillion), the report said.

Average daily new loan disbursements fell to the lowest since February, as government steps to restrain credit to individuals and central bank steps to raise interest rates contained red-hot demand for consumer, working capital and mortgage loans.

The average annual rate charged for loans to both individuals and companies rose to 39.7 percent from 39.5 percent in June. It climbed from 34.6 percent a year earlier, the report added.

Copyright Reuters, 2011