Brazil Card Payments Up 23 Percent

By Ben Tavener, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazil’s card market in 2011 is poised to grow by some 23 percent year-on-year, with payments by credit, debit and store cards set to reach R$667 billion (US$370 billion), according to Brazil’s Association of Credit Cards Companies and Services, Abecs.

To the end of September (third quarter of 2011) spending had reached R$474 billion, and Abecs predicts that by the end of the year, Brazilian households will make 26.2 percent of their purchases by plastic, up from 24.5 percent last year.

Abecs also reported that 2.1 billion card transactions were registered in the third quarter of 2011, up eighteen percent on the same period last year.

“This is due to the appreciation of the [Brazilian] real and the increased purchasing power of Brazilians,” Abecs President Claudio Yamaguti was reported by Globo News as saying, adding that the biggest increases had been observed in Goiânia, in Brazil’s central-west region, fueled by an expansion in agriculture output.

The organization says 36 million new cards were issued in the nine months to September 2011, meaning some 670 million cards are now in circulation in Brazil – ten percent more than the same time last year.

The nature of the holiday season – coupled with the extra cash in Brazilians’ pockets from employees receiving the eagerly-anticipated (and legally required) year-ending “thirteenth salary” normally heralds a time of increased spending, but the organization is predicting that this seasonal growth is set to cool down this Christmas, up 30 percent on the previous eleven months as opposed to last year’s 40 percent increase.

The organization also warned that it is expecting 2012 to see slower growth, despite cuts in Brazil’s key interest rate, the SELIC, and recent measures brought in by the government to stimulate consumer spending – which will only be felt in the second half of next year.

“There is still huge room for growth,” said Yamaguti, predicting that the share of cards in private transactions will rise to 36 percent of the total in 2015.

And indeed foreign businesses are looking to take their slice of the market, with credit card companies such as American Express running regular TV advertising campaigns.

Credit card purchases made by Brazilians outside Brazil rose eighteen percent in the third quarter of 2011 – a quarter total of R$5.5 billion spent abroad.

Despite many welcoming the news about increased spending in terms of Brazil’s economy, there is also now concern that Brazilian credit card consumers are being left struggling to pay off their debts, after new requirements brought in by the Central Bank in June now mean at least fifteen percent of credit card debt must be paid back each month.

The result, according to Bloomberg, is that Brazilians are now putting an incredible 99 percent less cash into savings accounts, compared with a year ago, and the proportion of family income now going on debts has been pushed to a record 22.2 percent (compared to 16.09 percent in the U.S.).

Experts are saying that spending on credit cards will increase for the time being, along with the amount of debt Brazilians allow themselves to accrue. As the economy grows and Brazilian’s quality of life improves, so will the desire for purchasing more expensive things along with it.

However, they are warning that it could lead to a drop in spending in the future, which would hit the economy, as people eventually try to settle their debts by cutting back on their expenses.