Record Christmas Sales and Debt in Brazil

By Ben Tavener, Senior Contributing Reporter

SÃO PAULO, BRAZIL – With Christmas less than two weeks away and extra cash in shoppers’ pockets thanks to the government-mandated thirteenth salary, Brazilians have been hitting the stores and spending record sums. Yet given the highest-ever levels of personal debt that Brazilians are carrying, consumer advice groups have been warning shoppers to plan ahead and spend only what they can afford.

Recent figures from Brazil’s Central Bank show that, on average, 44.4 percent of family income is now being kept aside to deal with mounting debts.

Government incentives to spend, cheaper credit and reduced tax rates on some products – notably cars and domestic appliances, have led to more families getting into debt and defaulting on payments, analysts say.

Record figures from Serasa Experian Consultancy show 5.5 million more Brazilians defaulted on their debts between January and October this year. Nearly half of these are reported to be from Brazil’s new middle class – known as the “Class C”– and that seventy percent are aged between 25 and 49.

Analysts say this new middle class is still adjusting to having greater spending power, and failing to budget appropriately. Consumer organizations have been warning Brazilians to spend within their means and avoid impulse buying, even if taking the more attractive route of paying in installments.

Some economists have advised that there is no problem in splitting payments in this way, as long as they are sure the purchases will not jeopardize their ability to pay off other debts – such as mortgage payments – in future months.

“Often, consumers fail to envision the debt they are getting themselves into, buy more things and, when the bill arrives or the check is cashed, the amount exceeds what they can pay,” economists from Serasa Experian Consultancy were reported as saying, adding: “The best Christmas present is having no [debt] to one’s name.”

However, despite the debts – analysts expect Brazilians to spend more than ever on Christmas this year.

São Paulo’s Federation of Goods, Services and Tourism Commerce, FecomercioSP, says business is booming and that the state will see R$44.7 billion (US$21.5 billion) spent on the holiday season in this year, up R$6 billion on 2011.

The average family in São Paulo will spend an extra R$753 in December on Christmas and New Years, FecomercioSP reports, R$260 of which on presents alone. The amount spent on the average present has increased from R$55 last year to R$60-65 in 2012.

São Paulo’s famous shopping street, Rua 25 de Março, has been bustling even more than usual recently, and businesses there have reported an increase of around ten percent on the same period last year.

A survey of 750 Rio businesses carried out in November by CDL-Rio Study Center showed that a mixture of special offers and extra cash from the thirteenth salary meant businesses were expecting an increase of at least nine percent on last year’s sales in 2012.

Experts have been giving out tips – such as shopping early, comparing prices and trying to pay à vista (in full) – as well as warning those new to shopping online to be vigilant of fake shops and fraudsters.