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The following articles was written for the ‘Property Secrets’ online magazine – the original of which can be read by clicking here.

According recent statistics from the Procon foundation (a Brazilian government sponsored consumer protection agency), the average personal loan interest rate in the country witnessed its first drop since November 2009 – pointing to increasingly encouraging signs of improving credit conditions in the country.

The foundation’s analysis tracked the major banking institutions rates with the following results:  Bank of Brazil – 5.28%; Bradesco – 5.50%; Caixa Econômica Federal – 4.78%; HSBC Brasil – 4.81%; Itaú – 6.02%; Safra – 5.40% and Santander – 5.63% (averaging out at 5.35%).

Such drops are debated to point to the increasing importance of credit lending for the future of Brazil’s banking institutions who, despite the three consecutive national interest rate rises, have continued to capitalise on the country’s increased thirst for both unsecured and secured borrowing: early September data from the Caixa Econômica Federal – also showed the expected house lending level for 2010 to reach R$ 70 billion (£26 billion) compared to R$ 47 billion (£18 billion) in 2009.

As a result there have, particularly in recent months, been increasing concerns of an overheating credit market and debates that Brazil may be developing its own version of an impending crisis.  The Procon foundation’s evidence, however, refutes such claims and indicates that consumers are generally using more caution before taking on loans which is served by the responsible lending philosophy that has been long adopted by the banks themselves.  These practices have been reinforced by legislation increasing the amount of capital the banks must have in reserves as well as raises in the international Basel Accord, which Brazil has long operated within the realms of.

For the foreign property investor looking into Brazil – it remains nevertheless very difficult to access credit without a formal position as a company owner in the country and/or a business visa (although investment in developer finance programmes / funds is entirely feasible).  However, Brazilian commentators and real estate experts are pointing to the improving overall credit conditions as an encouraging sign for both domestic and international home buyers. According to Luis Lessa from the ADIT organisation in an interview with the Brazil Real Estate & Land Investment Guide, within the year, the credit lending that is currently very apparent in the Brazilian market place will become more restricted and this will be a time when the country will start looking further for international investors and potentially reducing such barriers to entry.