Dallas Morning News - 09/05/98
Demand falls as rates soar; lending to resume when economy stabilizes
Associated Press
MEXICO CITY - With interest rates surging and demand plummeting, Mexican bankers said Friday they had temporarily stopped lending money to consumers for purchases of cars and homes.
''Under current market conditions, it's better to wait and see,'' said Araceli Espinosa of Grupo Financiero BBV-Probursa.
Mexico's financial markets have been battered by the turmoil that rattled Asia and now Russia.
The national currency, the peso, has been tumbling to new lows almost daily. On Friday, it closed at a midrate of 10.22 to the dollar, off the 10.14 rate of the previous day.
The stock market, too, has been shaken, and interest rates have jumped. Mexican stocks tumbled for a second day Friday on concern about higher Latin America risk. The Bolsa index fell 57.22 to 3045.17, recovering late in the day from a drop of more than 133 points.
''The granting of consumer loans has been temporarily suspended,'' said Vicente Rodriguez, spokesman for Grupo Financiero Bancomer. ''We also decided to restrict new mortgages in the face of the current
situation of volatility and high interest rates.''
Most Mexican banks had been making car loans with a fixed interest rate based on the average interbank interest rate, which surged 2.46 percentage points to 39.67 percent on Thursday.
The rate has risen by 17.97 percentage points in the past month as the central bank restricted liquidity in the money market to contain inflationary pressures and currency volatility.
As of June 30, BBV-Probursa's outstanding consumer loans stood at around 640 million pesos, or $63.1 billion, representing only about 2.8 percent of total outstanding loans, Mr. Espinosa said.
''No one expected interest rates at these levels, and that's why we're now very careful,'' he said.
Mr. Rodriguez said the bank plans to resume consumer lending as soon as rates stabilize.
Other financial institutions, such as Monterrey-based Grupo Financiero Banorte, registered such low demand for consumer loans that new applications had fallen to almost zero.
''We're able to analyze applications, but nobody wants new loans. With these interest rates, there's just no demand,'' said a Banorte spokesman, who declined to be identified. |
