July 28, 2009
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News: Mexico's CC Delinquencies Continue to Rise
The U.S. isn't the only country facing a credit card crisis; Mexico has its own albatross to carry. Mexicans are finding themselves falling deeper and deeper in debt. Mexico's government officials have recently reported that in the City of Juarez nearly 13% of its credit card accounts are delinquent. Mexico's National Commission for the Protection and Defense of Financial Services Users (CONDUSEF) facilitates card debt negotiations between banks and consumers and released its recent analysis of Mexico's credit debt position. The agency defines delinquent debt as accounts that have had no payment activity for three months or more. Overall, the country's has a 10.9% delinquency rate, the highest level since 1999. Delinquent credit card debt in Mexico sits at approximately $1.7 billion. Government officials are concerned the country will soon reach levels near 12.7%.
Pascual O'Dogherty, the Chief Analyst for the Central Bank of Mexico stated that Mexicans increased their credit card use by 49% in 2008 which will most likely lead to even higher levels of credit defaults. Despite these glum numbers, O'Dogherty maintains that the Mexican banking system is sufficiently capitalized. Despite the increasing numbers of card delinquencies, banks have not stopped promoting their use. Some have even continued to offer 0% interest for the first 6 to 12 months. Banorte, Mexico's only owned large bank, says they will continue issuing cards to individuals in the lower income bracket. Credit cards are also being promoted as a means to boost Mexico's slow tourist business.
Banorte can afford to take risks as its owner Grupo Financiero Banorte recently reported nearly $240 million profit for first and second quarter. The company's margin was up 16% compared to same time 2008 and their rate of return was 15.2%. Despite the fact that credit card earnings were down, card earnings contributed to 84% of the bank's profits. Mexico's average Total Annual Cost (CAT) for cards is a whopping 41.78%; the Banorte has the lowest in the country at 25.4%. Mexican citizens are not sitting idle while the cost of credit rises to destructive levels. A group of consumer advocates are gathering in Mexico City to discuss a new consumer campaign.