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"Peruvian Families are more indebted than in Chile and Colombia"
-The high dollarization in Peru is a latent danger, according to the rating agency Standard & Poor's (S & P). Watch more debt in the middle and lower middle classes.
OMAR Manrique[email protected]
Sergio Garibian, Director of Financial Services at Standard & Poor's
What weaknesses in the Peruvian economy?
There is a high dollarization of assets (loans) and liabilities (deposits) in the financial system. In the region, Uruguay, Paraguay and Peru are those with higher dollarization problem.
How can I overcome this problem?
It is extremely difficult, and regulatory restrictions put further worsens the situation. The only way to improve confidence, which is not so simple and is part of a gradual process.
Why risk exposing the economy with dollarization?
A further delay. When there is a sustained trend to devaluation people can not repay their loans in dollars. That happened in 2003 with the Uruguayan crisis, when the delay reached 70%. Although this is not the baseline scenario for Peru, dollarization is a latent danger.
And how assesses debt levels of households in the country?
It is superior to the families of Chile and Colombia. Unbanked people talk and do not include informal loans, as there is no way to measure the latter. Income level engaged in Peruvian household debt is higher and growing faster than in other countries, and this is due to strong credit growth in Peru in recent years.
How do you measure the degree of indebtedness?
In proportion to income. The 17% of family income is committed to debt service (interest plus repayment of obligations). In Brazil, this number is around 19.4% and is the highest in Latin America. While in Chile is at 10%, in Colombia, in 14%.
What risks posed by these levels of debt?
Eventually, people could not fulfill their commitments. So Standard & Poor's is continually this indicator. We see a higher level of debt in half and lower middle classes and emerging on credit cards and consumer loans.
But now consumer loans are growing less ...
Indeed, there is a slowdown will lead to a personal loan growth of 15% at year end, which remains strong. This lower growth is good because it allows people down debt and financial system conveniently rearranged as happened after 2009.
So what are the main concerns of S & P?
The high dollarization, as each point of reducing cost much, but the latest standards could give you more momentum. There is also the rapid credit growth and relaxation in some standards for lending.
Those are the three main concerns about the system
Financial. And in the mortgage segment?
We see price bubble linked to funding, but turn on the light by the loan to value (percentage of housing that is financed by banks) of mortgage loans, which is between 80% and 90%. In Chile and Colombia is 70%, which denote here is more aggressive in placing mortgages, and also has the government encouraging this market. We must be careful not sobreendeudar families. This could lead to complications in the medium term.
But the Central Bank has taken steps to discourage vehicle and mortgage loans in dollars.
That is healthy, because you have to pay to the debtor in the same currency with which receives its income. In addition, the Peruvian financial system is very liquid, high quality in its portfolio, is well capitalized and well provisioned, factors that counteract the negative aspects of which we speak.
Name: Sergio Garibian
Position: Senior Manager and Analytical Manager of Standard & Poor's.
Education: Economics at the Catholic University of Argentina.
Specialization: Masters in finance at CEMA
THE PERUVIAN accessing funding are at high risk of default, according to Experian.
OF APPROPRIATIONS financial system are in dollars, according to statistics from BCR.
Increased dependence on external market
Refinancing. S & P also views with some concern the increased dependence on external funding from banks, which since 2010 accelerated bond issues on international markets. In a scenario not as benign as now, would be a risk to refinance these obligations in the medium term.