Booming Brazil

There is an article in the New York Times today on the economic boom that Brazil is experiencing currently. While the United States suffers through an annual economic growth rate of 1.9%, Brazil's growth rate for the last year was upwards of 5%. While not as frenetic a pace as China or India, it is probably a much more managable growth rate for Brazilian businesses, allowing them to transition more smoothly into the more prosperous economy. Even more encouraging is the news that, during this economic boom, the income gap between the rich and the poor has shrunk by 6 percentage points. The article credits the growth to government programs such as Bolsa Familia, which provides food subsidies for lower-income families, and the creation of government-backed microloan banks that provide capital to small businesses.
However, amid all the back-clapping for Brazil, the New York Times mentioned some things positively that I did not find as reassuring:

In fact, with a stronger currency and inflation mostly in check, Brazilians are on a spending spree that has become a prime motor for the economy, which grew 5.4 percent last year.

They are buying both Brazilian goods and a rising flood of imported products. Many businesses have relaxed credit terms to allow Brazilians to pay for refrigerators, cars and even plastic surgery over years instead of months, despite some of the highest interest rates in the world. In June the country reached 100 million credit cards issued, a 17 percent jump over last year.

It seems to me that this is the same sort of consumer exuberance, propped up by possibly dubious credit/loan practices that put the American economy in the disastrous position it is in today. In the short run, such a sudden increase in purchasing ability makes perceived wealth of consumers increase, but in the long run, it simply increases the debt that they carry on their shoulders. Therefore, while the economic growth on the shoulders of domestic growth is likely a positive occurrence, if that domestic growth encourages behavior that is driving an increase in irresponsible indebtedness for average Brazilians, I do not believe it is in the best interest of Brazilians or their economy.

[via NYT]