Monday,
August 3, 2009
Mexicans are going More and More into Credit Card Debt
Frontera NorteSur
Although it evades the sensational
headlines of the drug war, another crisis is gripping Ciudad Juarez and other Mexican cities. With each passing day, the consumer
credit crisis is sucking more and more Mexicans into a deepening financial hole. In the credit card segment alone, at least
13 percent of the 245,000 credit card users in Ciudad Juarez are now delinquent in their payments, according to a Mexican
federal government official.
"This is without taking into account the bad debts already sold to private collection
agencies and which do not currently enter onto the balance sheets of the banking institutions," said Jorge del Valle Cosio,
Ciudad Juarez director for the National Commission for the Protection and Defense of Financial Services Users (Condusef).
The
federal agency promotes negotiations and settlements between credit card issuing banks and cardholders.
In Mexico, delinquent
debts are defined as accounts with more than three months of non-payments. Nationwide, bad credit card debts make up at least
10.9 percent of the overall portfolio. Steadily inching upwards toward the record 1999 delinquency rate of 12.7 percent, overdue
Mexican credit card debts are now at their highest level in nine years.
For comparison's sake, delinquent US credit
card debts increased from 5.52 percent of the portfolio during the last trimester of 2008 to 6.6 percent in the first
trimester of 2009.
In April and May, nearly $60 million in new overdue debts pushed the overall amount of delinquent
credit card debt in Mexico to approximately $1.7 billion.
"We are going to see even greater figures of credit card
delinquency," predicted Pascual O'Doherty, chief analyst for the central Bank of Mexico.
O'Doherty said
that the overall line of credit used by Mexican cardholders increased from 39 percent in December 2007 to 49 percent one year
later. The high bank official, however, insisted that the Mexican banking system was still sufficiently capitalized.
Despite
the recession and deepening consumer crisis, credit card use has been brisk in some regions of Mexico. For instance, a study
by the Aguascalientes Research Center for Business Development reported that use of credit cards in the central Mexican city
increased by 40 percent during the first three months of this year.
Banks continue to promote credit card spending,
some offering 6 or 12-month interest-free purchases at big transnational stores like Wal-Mart and Office Depot.
Credit
cards are being touted as a way to reactivate the ailing tourism sector. The summer vacation months of July and August are
a tempting time for financially hard-pressed Mexicans to resort to credit cards as the tickets to a long-needed getaway.
Banorte,
the only remaining large bank in the country owned by Mexicans, pledges it will issue credit cards to applicants with incomes
as low as $240 monthly. Boasting it has the lowest Total Annual Cost (CAT) for a credit card in the Mexican market at 25.4
percent, the Monterrey-based Banorte promises "the easiest life for all Mexicans."
But Mexican customers have made
life pleasurable for Banorte. The bank's parent corporation, Grupo Financiero Banorte, reported profits in the $240 million
range for the first six months of 2009. Financial margins were up 16 percent in comparison with the same time period in 2008,
and the rate of return was calculated at 15.2 percent. Although credit card income was down, the company's banking operations
were still credited with increasing the latest profits by 84 percent.
According to Condusef, the CAT for bank-issued
credit cards currently averages 41.78 percent, although some institutions charge as high as 104 percent. Credit card holders
getting cash advances from an ATM are assessed fees that range from approximately $3 to $10 for each transaction.
Two
big banks, Citigroup's Banamex and the Spanish-owned BBVA Bancomer, control 57 percent of the Mexican credit card market,
according to the National Banking and Securities Commission.
Like other foreign banks, BBVA Bancomer has discovered
its presence in Mexico to be very rewarding. In a project that might be considered the modern equivalent of the erection of
the pyramids that once dominated ancient Mexican skylines, BBVA Bancomer plans to build two huge complexes in Mexico City,
including a 50-story tower in the heart of the capital city. Scheduled for completion in 2012 at an estimated cost of $900
million, the construction project counts on local tax breaks.
"Mexico deserves this type of investment and I
am convinced it will be one of the great countries of the 21st Century, said BBVA President Francisco Gomez on a recent visit
to Mexico City.
Meanwhile, public anger simmers over the high cost of credit cards and the growing consumer debt crisis.
Representing ten Mexican states, activists connected to the El Barzon debtor advocacy organization gathered in Mexico City
in July to plan the launching of a new consumers' campaign set for September 23 of this year.
——————————
Sources: El Diario de Juarez,
July 22 and 23, 2009. Articles by Gabriel Simental and Jessika Becerra/Agencia Reforma. El Universal, July 10, 14 and 20,
2009. Articles by Romina Roman Pineda. Aguas, July 12, 2009. Article by Marcela Gonzalez. Tribuna de la Bahia/Agencia Reforma,
July 7, 2009. Articles by Jessika Becerra. La Jornada, June 22, 2009; July 5, 7, 16, 2009. Articles by Victor Cardoso, Bertha
Teresa Ramirez, Juan Antonio Zuniga, Juan Carlos Miranda, editorial staff, and the Reuters News Agency.
——————————
Frontera NorteSur (FNS)
Center for Latin American and Border Studies
New Mexico State University
Las Cruces, New Mexico
——————————
Reprinted
with authorization from Frontera NorteSur, a free, on-line, U.S.-Mexico border news source; translation FNS
