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 Editorials | Issues | September 2007 
Is a Credit Card Debt Crisis Looming in Mexico?
 Frontera NorteSur
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| | Mexican banks and other lenders are still approving credit cards to the tune of about 6,600 plastic cards every day. |
New numbers strongly suggest that Mexico's level of consumer credit card debt is steadily sliding from the "yellow" zone into the "red" one. A new report from the official National Commission for the Protection and Defense of Financial Services’ Customers (Condusef) reveals that the percentage of bad debts grew from 4.6 percent of total credit card debts during the first trimester of 2007 to 6.1 percent of the overall debt load by June of this year. The jump represents a 100 percent increase in the amount of overdue credit card debts from June 2005, when only 3 percent of the overall debt sector in question was in arrears.
Warning that if the present trend continues, Condusef President Luis Pazos predicted overdue credit card accounts would amount to 7.1 percent of the total credit card debt load by June 2008. Pazos said that such a development would be dangerous to the health of the Mexican banking system.
From 2001 to 2007, the percentage of Mexico's Gross National Product attributed to credit card spending rose from 0.59 to 2.38 percent.
Approximately 12 million Mexicans, or about one in nine residents of the country, currently hold about 18 million credit cards. The average line of credit for each customer is slightly more than $1,500. In 1996, only 6 million credit cards circulated in Mexico.
Despite the mounting consumer debts, Mexican banks and other lenders are still approving credit cards to the tune of about 6,600 plastic cards every day. In the last two years, 40 percent of new credit card holders reportedly did not have credit histories prior to receiving their plastic.
High profits encourage largely foreign-owned banks to keep handing out new consumer credit cards. Pazos said that banks' aggressive promotion campaigns help explain the plastic money boom. Lines of credit have been expanded without the knowledge of cardholders, Pazos added. The consumer official urged banks to exercise caution in approving new credit cards.
Source: El Universal/Notimex, August 27, 2007.
Frontera NorteSur (FNS)
Center for Latin American and Border Studies
New Mexico State University
Las Cruces, New Mexico
FNS can be found at http://frontera.nmsu.edu/ |
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