is peru destined for a credit crisis?

This is the place for ON or Off topic conversations. Almost anything goes - but be kind, and no trolling.
Forum rules
While the rules in this forum are more relaxed than in other parts of the Expat site, there are still a few things we’d like you to remember: No name calling, no insults – be civil to each other!
mulcahen
Gold Member
Gold Member
Posts: 125
Joined: Sun Dec 18, 2005 3:35 pm

is peru destined for a credit crisis?

Postby mulcahen » Tue Jun 08, 2010 5:55 am

Saw an advert the other day offering credit cards to those earning above 400 soles per month. Cannot remember which bank. Also Cusco had become full of new shiny cars in the last two years or so bought from equally shiny new car dealerships

If you look at what the vast majority of people earn, there is no way they will be able to sustain these costs. This has been ( in my eyes) a very prominent change here in Cusco in the last two to three years. A sudden willingness to give credit. What has brought the change and are we going to end up in the same debt problems that USA and UK amongst others had/ have with everyone maxed out on their cards and car repayments and unable to pay them back. Is it a conscious decision by international banks to look for a new market? It worries me.
Last edited by mulcahen on Tue Jun 08, 2010 10:54 am, edited 1 time in total.


User avatar
mahou123
Gold Member
Gold Member
Posts: 598
Joined: Sat Mar 28, 2009 9:46 am

Re: is peru being destined for a credit crisis?

Postby mahou123 » Tue Jun 08, 2010 8:54 am

It´s the same in Chiclayo. I don´t remember seeing any new cars here back in 2004, now it is full of brand new shiny ´camionetas´, including likes of BMW X6 or Audi Q8, which I didn´t expect to see in Peru at all. There are new ´depas´ and new gated suburbs promoted everywhere, salespeople trying to sign somebody up for a credit card in all shopping centres. I guess this is something new for Peruvians, lot of people play ´points´ game and buying their 3x2 promotions in Tottus on credit. I´ve seen the other day a person buying about 30 soles worth of fast food at Bembo´s on credit card, and cash register girl asking whether they want it in ´quotas´, like paying 5 soles a month for half a year or something like that.

I guess at some stage the banks will start to get problems in collecting all this debt back, but at the moment they don´t seem too concerned. I heard also that interest can run like 90% a year in some cases.
User avatar
Alejandro
Gold Member
Gold Member
Posts: 195
Joined: Thu Jul 27, 2006 7:23 pm

Re: is peru being destined for a credit crisis?

Postby Alejandro » Tue Jun 08, 2010 10:11 am

March 2010 report from the Banks Superintendent's office shows that past due debts represent 1.73% of total debt vs. 3.8% in march 2005.

Report can be found here http://200.37.51.41/estadistica/financi ... ma2010.PDF

Those expensive cars in Chiclayo can be explained, at least in part, by those nice profit sharing checks received by engineers and other people working in mining projects in the north (up to 18 monthly salaries).
PTTurboe
Gold Member
Gold Member
Posts: 132
Joined: Thu Jan 21, 2010 11:29 am

Re: is peru destined for a credit crisis?

Postby PTTurboe » Tue Jun 08, 2010 12:00 pm

Well, this worries me quite a bit.

Real estate is widely overpriced. Land especially. That will crash once:

1.) The China Bubble POPS
2.) The US Dollar totally dies
3.) Peruvians are excited about the FTA with the US. Well, the US is in a depression folks. Exports are going to plummet.

Then how much will crime go up?

That is my concern.

Seriously thinking about getting my CE just so I can get a gun. I don't see any other benefit to getting one. Especially after 2 years when you have to pay taxes on your worldwide income. I guess I will let it expire at that point.

The world is getting ready to go into a depression. The US consumer driven world is toast.

Just my take. And I feel sorry for Peruvians for what is coming down the pike....
User avatar
rgamarra
Gold Member
Gold Member
Posts: 2392
Joined: Wed Feb 07, 2007 10:24 am

Re: is peru destined for a credit crisis?

Postby rgamarra » Tue Jun 08, 2010 1:21 pm

I worked in real estate in Orlando, Florida during the real estate boom. Property prices were going up $10K a week. The local newspaper had an article questioning if the bubble was going to pop and then in the subheader wrote that it was "not likely." 12 months later and the article proved itself a bunch of hot air.

Do I think Peru is going to have a credit crisis? Yes...Only if wages stay low and/or if unemployment sky rockets. I personally think Peru is on a non-sustainable path with all the credit floating around and sky high real estate prices based purely upon speculation.

Hopefully the Peruvian government doesn't sip on the kool-aid for too long and think that nothing can go wrong with no contingency plan if it does. It's going to take responsible social and financial policies to get Peru the "developed" status it's long been pining for. I think Peru has the potential to surpass more developed Latin American countries to become a first rate country itself, but it's going to take a lot of work and it's not going to happen over night.

If Peru does not learn from the credit crisis lessons of Europe and the U.S., then they will eventually be destined to make the same mistake.
PTTurboe
Gold Member
Gold Member
Posts: 132
Joined: Thu Jan 21, 2010 11:29 am

Re: is peru destined for a credit crisis?

Postby PTTurboe » Wed Jun 09, 2010 8:53 am

I totally agree.

When I was in Sarasota yelling "the prices are a bubble" no one listened. "It is different this time." "There is a huge pent up demand", etc.

I almost got in fist fights with people saying I was nuts.

So, I made as much money brokering and moved here. Now, those morons are bankrupt.

THERE WILL BE A CRASH HERE.

I am 47, have a BS in Real Estate Finance, was the youngest CCIM ever (27), and I have been a Broker - not a Salesperson, since I was 22.

Crime has increased in Costa Rica and Panama since the busts there. I am worried about the same thing here.

I hope the PCB pegs the Sol to gold/silver. Otherwise, it could get quite ugly....
User avatar
rgamarra
Gold Member
Gold Member
Posts: 2392
Joined: Wed Feb 07, 2007 10:24 am

Re: is peru destined for a credit crisis?

Postby rgamarra » Wed Jun 09, 2010 12:04 pm

As soon as my husband gets his US Citizenship (1 mo. from now -- hooray!) he's going down to Peru to do the paperwork and get our depa sold. I saw the bubble coming in 2007, we bought low to sell high and I have no problem selling our depa at a market price that I know is (in reality) overinflated.

We do not plan on buying in Peru again until prices settle down. With the current situation in Europe, we're looking at investing in a holiday home in Northern Italy, and with the crash that has hit Florida, we're also planning on buying an income property close to Disney (in cash of course).

Fortunately we're able to do this since we've weaned ourselves of credit dependency. I can only hope that Peruvians continue to realize the importance of buying in cash. It's going to be the people that make S/.400 per month that will be most affected by the evils of EZ credit.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Wed Jun 09, 2010 12:17 pm

mulcahen wrote:Saw an advert the other day offering credit cards to those earning above 400 soles per month. Cannot remember which bank. Also Cusco had become full of new shiny cars in the last two years or so bought from equally shiny new car dealerships

If you look at what the vast majority of people earn, there is no way they will be able to sustain these costs. This has been ( in my eyes) a very prominent change here in Cusco in the last two to three years. A sudden willingness to give credit. What has brought the change and are we going to end up in the same debt problems that USA and UK amongst others had/ have with everyone maxed out on their cards and car repayments and unable to pay them back. Is it a conscious decision by international banks to look for a new market? It worries me.



I have been seeing this coming since 2008. The other day I read an article where car loans are oferred with no money down. I have stood in line in grocery stores and watched people (upper class - with baby sitter and maids shooping with them), Request a payment plan on groceries. I often see in larco mar people purchacing food on credit cards. Seems, no one has cash and many at the endo of the month have to spend their whole check to pay credit card bills as well as mortgages. I have an uncle on my wife's side of the family (peruvian school teacher). He admits living well beyond his means. Credit is necessary so that he can cloth and feeds his wife and 2 kids. Have a friend his sister is 5000 solesw en debt, but only clears 500 soles a month. After living expenses does not have enough money to make it to the next payday. So she committed credit card fraud, saying that someone had robbed her purse and purchase items on her account. Credit is getting out of control. As we know economies are cyclic, the day of reckoning is coming as it has for all nations.

Personally waiting for down turn to pick up more real estate. (cascading affect regarding credit - mortgage default).

My humble opinion
Wine Lover
Gold Member
Gold Member
Posts: 74
Joined: Mon Dec 14, 2009 2:46 pm

Re: is peru destined for a credit crisis?

Postby Wine Lover » Wed Jun 09, 2010 2:16 pm

rgamarra wrote:As soon as my husband gets his US Citizenship (1 mo. from now -- hooray!) he's going down to Peru to do the paperwork and get our depa sold. I saw the bubble coming in 2007, we bought low to sell high and I have no problem selling our depa at a market price that I know is (in reality) overinflated.

We do not plan on buying in Peru again until prices settle down. With the current situation in Europe, we're looking at investing in a holiday home in Northern Italy, and with the crash that has hit Florida, we're also planning on buying an income property close to Disney (in cash of course).

Fortunately we're able to do this since we've weaned ourselves of credit dependency. I can only hope that Peruvians continue to realize the importance of buying in cash. It's going to be the people that make S/.400 per month that will be most affected by the evils of EZ credit.


Let us know how you go selling your depa and if you make a profit on it. (that is if you bought in the last 5 years)
I've noticed many Peruvians treat real estate like cars, in that brand new is better and worth more than second hand. With so many new apartments in construction they have a right to feel this way.

I remember reading that the average time to sell in Peru was more than 6 months
User avatar
rgamarra
Gold Member
Gold Member
Posts: 2392
Joined: Wed Feb 07, 2007 10:24 am

Re: is peru destined for a credit crisis?

Postby rgamarra » Wed Jun 09, 2010 4:14 pm

If like you say Peruvians treat real estate like cars, well we sold our (barely) used 2008 VW for a very reasonable price, which was pure cash in our pockets...So if Peruvians like to buy barely used cars, then no doubt they'll take interest in buying a barely used and furnished property.

Brand new construction is expensive. I wouldn't imagine selling our depa at the same price as a brand new property...so in my opinion, the depa is a better bargain to be had.

Whether we sell or don't sell, it's still a win-win investment for us, and with current municipal tax valuations, our property value is more than double what we purchased it for.

Peruvian consumers do not have the same mind set as foreigners in that their purchase habits are different. Six months seems reasonable by Peruvian standards. It took us nearly 6 months just to buy it new.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Mon Nov 15, 2010 9:39 pm

Peru, will have to make changes according to Havard Economist Michael Porter, a leading world authority on company strategy and the competitiveness of nations and regions, warned that Peru’s economic growth can’t be tagged a total success because it’s not benefiting all Peruvians.


Porter, a regular visitor to Peru, also warned that the country's financial system could be incubating a credit bubble. “And bubbles always pop, at some point,” he added.


http://www.livinginperu.com/news-13537- ... ard-expert
User avatar
LauraMH
Gold Member
Gold Member
Posts: 244
Joined: Wed Dec 10, 2008 11:55 am
Location: Arequipa, Peru

Re: is peru destined for a credit crisis?

Postby LauraMH » Tue Nov 16, 2010 10:49 am

I totally agree with all the postings. It is in for a crash. There is way too much easy credit. My husband works in microfinance and he and his friends all agree the same. Too much easy credit. They are laxing the rules just like happened in the US to cause the bubble. It's the same.

same everything. they give credit to people who can't afford it. prices increase. people need more credit. wages stay the same.

it's headed for disaster and so sad because there is so much potential. i don't think they have the will to stop it.

so we are going to rent and then buy after it crashes. only option. we have some land too but i dont think we'll sell it now. we'll do longterm investment.
Live, Love, Laugh
Remigius
Gold Member
Gold Member
Posts: 781
Joined: Sun Aug 01, 2010 2:20 pm

Re: is peru destined for a credit crisis?

Postby Remigius » Tue Nov 16, 2010 11:26 am

They're issuing credit cards to irresponsible people as if it were candy. Those people start buying stuff they normally cannot afford and subsequently are pounded by high interests. A very nasty business! Same thing with buying in terms: you have a refrigerator that costs 1200 soles cash or 30 terms of 50 soles. The differences are sometimes abysmal.
User avatar
Alan
Gold Member
Gold Member
Posts: 2978
Joined: Tue Sep 27, 2005 5:10 pm
Contact:

Re: is peru destined for a credit crisis?

Postby Alan » Tue Nov 16, 2010 12:09 pm

And have you noticed all the new taxis in Lima? Easy and smooth initial downpayment, but a $13,000 dollar car ends up costing $30,000 once it is paid off. Unbelievable. The only reason taxi drivers go for it is that the normal banks won´t lend to them, since they are informally employed.

The load is amortized every time they fill up with natural gas. Interesting system, but the folks getting rich here are not the drivers.
-----
"Hay que distanciarnos hoy para luego abrazarnos más fuerte".
-Guiseppe Conte, primer ministro italiano.
User avatar
tomsax
Gold Member
Gold Member
Posts: 1394
Joined: Tue Jan 16, 2007 10:28 pm

Re: is peru destined for a credit crisis?

Postby tomsax » Tue Nov 16, 2010 12:34 pm

I'm not in Peru so I appreciate my knowledge is limited on this compared to most of you.

But it seems that people are confusing two things here. There is the economic hardship of families that take out too much credit and then suffer high interest payments. That is a economic problem for the families concerned but not necessarily for the economy as a whole. That is made worse by high interests.

Then there is the danger of banks going bankrupt if too many people default on their debts. That would indeed be a economic problem for the country as a whole if it happens. But high interest payments are in part designed to cover that risk so this danger should actaully reduce with high charges and interest payments. If people are paying extortionately high interests payments that is not easy credit but quite the opposite.

Just giving people credit cards may not be irresponsible as far as the banks are concerned if they limit the amount of the credit available and charge enough to cover the risks on any debts taken up. I'm not saying that the banks are not giving out too much credit, I'm just saying the evidence provided so far on this thread are just judgement calls with little solid evidence provided.

My guess is that if there is a credit crisis it won't be because the banks fail as in the US and Europe. It will because the world economy falls further affecting Peru more and banks start limiting credit just because they know people will be less able to repay debts with a slowing economy. It will be more like what happened in Colombia in the late 90s where interest payments went through the roof. Is that a credit crisis? Maybe, but not like in the US and Europe.
Tom
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Nov 16, 2010 9:26 pm

Yes, you are correct about the banks in Peru, they have to be able to have enough reserves to cover debt. People are the economy and in recent news internal demand has driven the Peruvian economy. The majority of GDP in Peru in recent years is because of internal demand. Banks may not fail, but the possibility that there will be a credit crisis due to a drop in employment or other factors. The first thing that may be affected is housing.
Just as in the USA when a house goes into foreclosure or short sale in a community, it will affect the price of all homes in that community.

Some call it a bubble, but is in short, there will be a correction (housing), Techo Propio and Mi Vivienda are comparable to Fannie Mae and Freddy-MAC, they help low income people into homeownership.

In my opinion there will be a correction (housing or credit crisis). When thing are flying high Peru feels it will never end. The truth is that economies are cyclic. It is just prudent to be prepared, especially those who are entering the housing market at this point in time when housing is at it's peak.

I guess we can wait and see. With all the good news there is an undercurrent in the Peruvian economy and it is just good to be cautious.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Nov 23, 2010 10:42 am

More evidence: ( excerpts)
Peru and Latin America are taking shape of conditions for credit and financial crisis."

Marthans, who is professor of the Faculty of Economics at the University of Piura, said: Now we see a Peruvian extreme laxity in bank regulation, since financial institutions are acting very aggressively, and never been seen in 30 years," said Marthans to realize that the lines of credit cards being tripled by banks, without customers request.

The whole story:

Gestion.pe

Late credit payments on the rise.

In September rose 17.7%. Debt refinancing and avoiding penalty is reflected in the delay.
There are relaxed lending policies.

When banks take pride in its recent number of credits delinquencies only fell to 1.63% in October, some evidence emerging that all is not as good as it appears in the statistics.

And that level of default on bank loans, like all averages, would be statistically clouding the growing trend in loans in arrears.

"In Peru, analysts do not speak with sincerity in default, but it has been increasing steadily in consumer loans since 2007, and the trend is to continue to rise," said Juan Jose Marthans, former head of SBS in Canal N.

In fact, reports of the SBS show that in the first nine months of the year, total-due loans and past due loans-judicial collection of banks grew by S /. 254 million, or 17.7%, a rate that doubles the increase in outstanding loans (8.8%) in that span.

Even in 12 of the 15 banks operating in the country, due loans grew by more than 20% during the period, and four them grew more than 35%.

However, these details go unnoticed in the average arrears total bank loans, because such institutions conveniently refinance debt problems, or, simply, punish and remove from their balance sheets.

For example, in the credits for consumption by individuals, banks increased the amount of refinancing and restructuring of 10.8% in the period under review.

Banks offset the costs of these operations, with interest rates and high fees for the credits to reschedule with your customers.

Meanwhile, the penalty of portfolio-common practice for banks to maintain the quality of their loans, totaled S /. 759 million in the first half of the year for which financial institutions had to cover 100% with money supplies.

According Marthans, the resources to clean their portfolios are the surplus of the banks: "Luckily, the bank credit policies were quite cautious in previous years, leaving plenty of slack to deal with equity issues, and an ability to cover past-due portfolio other systems have not. "

The fact of having these surpluses have prompted the banks to blast a path of loans raises concerns in some sectors.

Picking up the alert launched by Michael Porter, Marthans, who is professor of the Faculty of Economics at the University of Piura, said: "Peru and Latin America are taking shape the conditions for credit and financial crisis."

Bankers Association reported yesterday that consumer credit cards broke record in October, giving further ammunition to those who argue that it will generate a credit boom (see page 19).

"Now we see a Peruvian extreme laxity in bank regulation, since financial institutions are acting very aggressively, and never been seen in 30 years," said Marthans to realize that the lines of credit cards being triplicated by banks, without customers request.

MANAGEMENT - 23/11/1910
User avatar
craig
Gold Member
Gold Member
Posts: 1214
Joined: Tue Jan 15, 2008 8:34 pm
Location: Pueblo Libre

Re: is peru destined for a credit crisis?

Postby craig » Wed Nov 24, 2010 10:05 am

Alan wrote:The load is amortized every time they fill up with natural gas. Interesting system, ...

Alan,

Would you elaborate? I am curious about what you mean.

Craig
--
It is error alone which needs the support of government. Truth can stand by itself. -- Thomas Jefferson
Alpineprince
Gold Member
Gold Member
Posts: 1499
Joined: Mon Nov 03, 2008 8:12 pm
Location: "Miraflores State of Mind"

Re: is peru destined for a credit crisis?

Postby Alpineprince » Sun Nov 28, 2010 11:46 am

craig wrote:
Alan wrote:The load is amortized every time they fill up with natural gas. Interesting system, ...

Alan,

Would you elaborate? I am curious about what you mean.

Craig

The difference in cost between a "load of nat gas" and gasoline is used to amortize the cost of the taxi! the program was set up under Toledo as "Mi Taxi".
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Thu Dec 02, 2010 4:50 pm

Latest update: http://correoperu.pe/correo/nota.php?tx ... _id=494003

Danger Will Robinson!!!!!! :-)

CENTRAL RESERVE BANK REQUESTS TO BE VIGILANT
Credit is growing at twice the GDP
December 2, 2010

For BCR, there are banks that have a higher interest rate because they perceive a higher default.

LIMA | The president of the Central Reserve Bank (BCR), Julio Velarde, turned on the amber light to indicate that credit in Peru growing twice the increase of Gross Domestic Product (GDP). But he said there is no risk of a credit bubble.

He stated that if the credit were growing continuously at a high rate, it would be an indicator of future crisis, but that's not something that is occurring. However, he said you have to be alert.

"The credit will grow one percentage point of GDP and, as previous crises in the world, they have been given where credit grew five points of GDP for several years, although this is not a precise rule," he said.

He cautioned that many times the cost of credit in Peru provides a delinquency greater than what actually is, because bankers are hoping to record the average delinquency in Latin America.

"They have models and nobody likes to lose money, they are corrected in time and are adequately provisioned, and I think there's a pretty solid financial system," said Velarde.
User avatar
JoshuS
Gold Member
Gold Member
Posts: 312
Joined: Sat Oct 24, 2009 9:40 am

Re: is peru destined for a credit crisis?

Postby JoshuS » Thu Dec 02, 2010 5:02 pm

tupacperu wrote:Latest update: http://correoperu.pe/correo/nota.php?tx ... _id=494003

Danger Will Robinson!!!!!! :-)

For BCR, there are banks that have a higher interest rate because they perceive a higher default.

LIMA | The president of the Central Reserve Bank (BCR), Julio Velarde, turned on the amber light to indicate that credit in Peru growing twice the increase of Gross Domestic Product (GDP). But he said there is no risk of a credit bubble.


My spanish is not the best, but I kind of like the "double talk" (?) :lol:
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Thu Dec 02, 2010 5:27 pm

JoshuS wrote:
tupacperu wrote:Latest update: http://correoperu.pe/correo/nota.php?tx ... _id=494003

Danger Will Robinson!!!!!! :-)

For BCR, there are banks that have a higher interest rate because they perceive a higher default.

LIMA | The president of the Central Reserve Bank (BCR), Julio Velarde, turned on the amber light to indicate that credit in Peru growing twice the increase of Gross Domestic Product (GDP). But he said there is no risk of a credit bubble.


My spanish is not the best, but I kind of like the "double talk" (?) :lol:


Exactly!!! Double talk.

I have always said in past post, that the end of Garcia's term Peru's financial system will be headed into peril. MEF may be cooking the books


More good stuff:
The Minister of Economy and Finance (MEF), Ismael Benavides wants citizen to have health insurance, private or public, to access credit in the financial system in 2012 .

Wow: You don't pay you will end up in the hospital :) Probably the insurance cover accidental death and dismemberment (Banks will be the new Mafia).
User avatar
JoshuS
Gold Member
Gold Member
Posts: 312
Joined: Sat Oct 24, 2009 9:40 am

Re: is peru destined for a credit crisis?

Postby JoshuS » Thu Dec 02, 2010 5:35 pm

tupacperu wrote:
(Banks will be the new Mafia).


They already are. It is a malevolent cancerous tumor, already in metastasis, reaching now Peru as well.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Thu Dec 02, 2010 5:43 pm

More fuel to the fire:
The credit boom is progressing and several banks now offer the ability to finance the purchase of a new car without a down payment and pay a maximum of five years (60 months).

More info: links below


Translated:
http://translate.google.com/translate?u ... =&ie=UTF-8

Spanish:
http://economia.terra.com.pe/noticias/n ... P_79412469
Ruud
Gold Member
Gold Member
Posts: 183
Joined: Tue Jul 10, 2007 6:40 pm
Location: Tarapoto

Re: is peru destined for a credit crisis?

Postby Ruud » Thu Dec 23, 2010 3:13 pm

Just an example how easy credit is and what amounts we are talking about.

When I met my current wife more the 3 year ago, I helped her paying her Saga monthly quotes and forbid her to ever again buy on credit.
So she build a perfect credit history with my help. Her current status is:
Saga/falabella max credit 13000 soles
Unicard max credit 10000 soles
Carca card(?) max credit 3750 soles
Total 26750 soles available to spend.

She does not have a job nor a regular income......
Alpineprince
Gold Member
Gold Member
Posts: 1499
Joined: Mon Nov 03, 2008 8:12 pm
Location: "Miraflores State of Mind"

Re: is peru destined for a credit crisis?

Postby Alpineprince » Thu Dec 23, 2010 7:15 pm

Ruud wrote:Just an example how easy credit is and what amounts we are talking about.

When I met my current wife more the 3 year ago, I helped her paying her Saga monthly quotes and forbid her to ever again buy on credit.
So she build a perfect credit history with my help. Her current status is:
Saga/falabella max credit 13000 soles
Unicard max credit 10000 soles
Carca card(?) max credit 3750 soles
Total 26750 soles available to spend.

She does not have a job nor a regular income......

Glad to hear she is "your" wife!
Ruud
Gold Member
Gold Member
Posts: 183
Joined: Tue Jul 10, 2007 6:40 pm
Location: Tarapoto

Re: is peru destined for a credit crisis?

Postby Ruud » Fri Dec 24, 2010 12:36 am

Alpineprince wrote:Glad to hear she is "your" wife!


Almost unconscious you adapt the customs of the country where you live. When in Rome, live like the Romans.

From another perspective, you can tell from my writing that English is not my mother tongue, so these nuances of political incorrectness might slip thru.

But again that said, it is only political incorrect in the Western world. In Peru / South American no one would even understand what you mean by that moralistic comment.
User avatar
fanning
Gold Member
Gold Member
Posts: 1419
Joined: Sun Aug 17, 2008 8:01 pm
Location: Lima

Re: is peru destined for a credit crisis?

Postby fanning » Fri Dec 24, 2010 7:27 am

I also do not get the point why 'my wife' is incorrect ? It is MY wife or not, it is not yours anyway. Your wife is your wife, and nobodies elses..

But maybe it is the direct-translation and cultural differences from us non-english motherlanguage guys.
User avatar
gerard
Gold Member
Gold Member
Posts: 421
Joined: Mon Aug 20, 2007 10:43 am
Location: Lima

Re: is peru destined for a credit crisis?

Postby gerard » Fri Dec 24, 2010 9:17 am

I think it just meant your wife rather than his given that she might spend all of the money.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Dec 28, 2010 2:14 pm

Ruud wrote:Just an example how easy credit is and what amounts we are talking about.

When I met my current wife more the 3 year ago, I helped her paying her Saga monthly quotes and forbid her to ever again buy on credit.
So she build a perfect credit history with my help. Her current status is:
Saga/falabella max credit 13000 soles
Unicard max credit 10000 soles
Carca card(?) max credit 3750 soles
Total 26750 soles available to spend.

She does not have a job nor a regular income......


Thanks for the post. I have many of the same example from family in Peru.
I this with other couples that I know. A friend of mine who married a Peruvian had the same case, but his wife was employed and was over-extended.

Your wife has about $9000.00 in debt and no job, if that is not ez credit I do not know what is?
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Dec 28, 2010 2:15 pm

fanning wrote:I also do not get the point why 'my wife' is incorrect ? It is MY wife or not, it is not yours anyway. Your wife is your wife, and nobodies elses..

But maybe it is the direct-translation and cultural differences from us non-english motherlanguage guys.


I take it as: I am glad she is your wife not mine (that is some debt in Peru)
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Dec 28, 2010 2:31 pm

IMHO:

This is exactly what is driving GDP in Peru, Internal demand/credit.
All the news on GDP and growth percentage are predicated with this figure (internal Demand and Private investment.)

The big IF:

president of the Association of Banks (Asbanc), Oscar Rivera: will try to prevent customers from falling into indebtedness, as that would jeopardize the system.

- how do you control an overzealous credit demand?
- how do you control mortgages when banks are looking for profits?

When they say do not worry, WORRY!!!

Gestion.PE

Asbanc: credit expansion should not cause concern
12:24 Oscar Rivera said the Peruvian banking system is stable, solid and sufficient reserves. Estimated that bank loans continue to grow in 2011.

The president of the Association of Banks (Asbanc), Oscar Rivera, said that should not raise concerns that are experiencing growth of loans from private banks, as this is the result of the expansion of the Peruvian economy.

"For the first time in the last 30 years that the growth is based on domestic consumption and development is supported by banks. Peru's growth is the result of efforts of the Peruvian and the confidence of investors in the country, this must be accompanied by the respective loans, "he said.

He recalled that the Peruvian bank is fully stable, solid and sufficient reserves due to the corrective action taken by the Superintendencia de Banca, Seguros y AFP (SBS) and the Central Reserve Bank (BCR).

In that respect he felt that the placement of bank lending will expand over the next year and is expected a growth rate of 20 percent.

He said that while growth is expected in loans next year, will try to prevent customers from falling into indebtedness, as that would jeopardize the system.

It should be noted that total loans of the private commercial banks in Peru reached U.S. $ 38.273 million in November 2010, a figure that represented a new record.

This amount was higher than $ 618 million (1.64%) compared to October 2010 and 6.714 million (21.27%) compared to November 2009. Rivera said the NPL of the banking system in Peru is 1.5% and is the second lowest in Latin America.

He said that the micro-level default in the banking system is 3.5%, while at the financial system in general is six per cent, and SBS is taking steps to control this indicator. "But by 2011 we will have lower rates of delinquency, I am convinced and we are noticing a downward trend," he told TV Peru.

He noted that Brazil's Banco Itau, a Bank of China and Bank of Chile Paris have had meetings with the SBS to assess their entry into the Peruvian market.

He said the latest plans to open offices in Peru and provide credit, while the first two will open representative offices. "The Bank for Paris is like consumer banking and Banco Falabella Ripley, theoretically is to put more credit cards. One way is to "bank credit cards but you have to see how to handle it," he said.

He also felt that the interest rates for use of credit cards will not fall during 2011, so customers should look for options that fit your ability to pay.
Last edited by tupacperu on Tue Dec 28, 2010 2:41 pm, edited 4 times in total.
User avatar
Kelly
Moderator
Moderator
Posts: 3871
Joined: Fri Mar 11, 2005 9:28 pm
Location: Lima, Peru
Contact:

Re: is peru destined for a credit crisis?

Postby Kelly » Tue Dec 28, 2010 2:32 pm

She's not in debt - that's the credit line available. (although your point still stands) Showing regular payments on something is enough to get your credit level boosted.

I went through the same thing with my husband when I came here, although tbh, it was his ex-wife who had botched up his credit.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Dec 28, 2010 2:43 pm

Kelly wrote:She's not in debt - that's the credit line available. (although your point still stands) Showing regular payments on something is enough to get your credit level boosted.

I went through the same thing with my husband when I came here, although tbh, it was his ex-wife who had botched up his credit.



Yes, I understand, but as you said, ez credit is the point and Rudd stepped in before the potential disaster.
How many Peruvian are in the same boat but in debt without a job?
Wine Lover
Gold Member
Gold Member
Posts: 74
Joined: Mon Dec 14, 2009 2:46 pm

Re: is peru destined for a credit crisis?

Postby Wine Lover » Wed Dec 29, 2010 9:41 pm

I can't see how they are going to avoid a credit crisis.

General credit rule of thumb says High Risk = High Margin.
This is all well and good but the problem is those who default on their credit aren't actually paying the interest. It just accumulates on their account and then ends up in the accounts receivable column as false equity on the bank's balance sheet.
The bank never actually recieves the interest.
I believe Peruvian mortgages are non-recourse as well, meaning any credit default and the bank can only recover the collateral. If the collateral drops in value the customer doesnt have to pay back the difference and it's the bank's loss.

Irrespnsible lending always leads to disaster and bank's who lend non-recouse are always asking for trouble.
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Wed Jan 19, 2011 9:13 pm

Financial minds agree on what is happening in Peru boom:
This was the same Frenzy that happened in Japan, took them 10 year to recover (never fully recovered).


Capital controls roil Latin America bond markets by evoking ‘80s

http://www.financialpost.com/Capital+co ... story.html

Summary:

Latin American nations from Brazil to Peru are returning to currency and foreign investment controls that marked the 1980s era of hyperinflation.


Since the start of the year, policy makers across the region have increased dollar purchases to record levels, raised reserve requirements and curbed banks’ ability to bet against the dollar in a bid to stem a 29% rally in Latin American currencies since March 2009. Controls may stiffen, and other nations could join the “market-unfriendly” drive, said Alberto Ramos, an economist at Goldman Sachs Group Inc.


“In all these countries, if it continues, there will be the temptation to escalate the level of restrictions,” said Ramos, a former economist at the International Monetary Fund, in a phone interview from New York. “We cannot throw into the dustbin four decades of good economic research. Capital controls have serious economic costs.”


Rather than taking more measures to limit appreciation, Brazil needs to reduce spending to allow the central bank to cut its 10.75% benchmark rate, the second-highest in the Group of 20 nations after Argentina’s, said Lumen Advisors’s Nocera. Chile, the world’s biggest producer of copper, should diversify its economy away from exports of the metal
<=This the the case with Peru also


Sooner or later you pay the price” for stepped-up controls, said Nocera, a former IMF economist and fund manager with Soros Fund Management LLC. “You pay the price of lower growth or higher inflation.”
User avatar
tupacperu
Gold Member
Gold Member
Posts: 3350
Joined: Sun Sep 10, 2006 10:36 am
Location: Pimentel Beach-Chiclayo- Sanford NC
Contact:

Re: is peru destined for a credit crisis?

Postby tupacperu » Tue Mar 01, 2011 11:36 am

Article in Gestion.pe: PERU

35% of the assets of companies is committed to debt
Companies in the commercial sector have a "leverage" more than 100% because they take short-term financing and sell on credit.

It is generally accepted as healthy when the leverage ratio of a company is about 50%, reflecting that half of its assets are financed with debt and half with its own capital.

At the end of last year, the leverage of nonfinancial companies listed on the Bolsa de Valores de Lima (BVL) reached a level of 35% in the last quarter of 2010, a level exceeded 31% the previous year, reveals Macroeconomic last report prepared by the BCR.

"It is not a company to leverage too much (about 100% of its assets), generating a credit risk. At any time there is a slowdown or an increase in interest rates in this situation a company could not respond, "said Enrique Diaz, president of Capital Market, Investment and Finance (MCIF).

http://gestion.pe/noticia/720857/35-pat ... ido-deudas

Return to “Expat Conversations”

Login  •  Register