A ripple begets a flood

摘要

In 2008 Luiz Inacio Lula da Silva, then Brazil's president, boasted that by the time the 'tsunami' unleashed by Lehman Brothers' collapse hit his country's shores it would dwindle to a 'little ripple'. The stimulus programme he put in place helped to carry Brazil through the credit crunch relatively unscathed. But five years later public money is still pumping into its economy, with ever more negative consequences. Public debt is rising. State banks are taking more of the credit market. And the government is warping accounting standards in its attempts to disguise all this. Concerned that consumers are overstretched, private banks have held back on lending in recent years. But since 2008 the corporate loan book of bndes, the national development bank, has grown by 24% annually, far above nominal-GDP growth of 11%. Caixa Economica Federal, a state retail bank, has expanded lending by 42% annually for the past three years (see chart). By June state banks had 50.3% of all outstanding credit, up from 33% in 2008-the first time they passed the halfway mark since a wave of bank privatisations in 1999.