The percentage of delinquent credit card loans issued by Mexican banks reached 7.6% in April, according to a report by the Mexican federal government's National Commission for the Protection and Defense of Financial Services Users.
The figure is up steadily since June 2005 - when just 3% of such loans were overdue. Mexican officials fear the rise could mean trouble for the consumer credit sector that has helped drive the country's economy in the past five years.
Bad debts notwithstanding, Mexican banks remain profitable. According to the Bank of Mexico (Mexico's central bank), in-country banks average a 23.8% rate of profit on available capital. The Mexican profit margin compares with 13.4% in the U.S. and 19.2% for Chile.
Still, Luis Pazos, president of the commission, warned last year that if delinquent credit card debts surpassed a 7.1% threshold, it could hurt the entire Mexican banking system. Jorge Aceves, an assistant director of the commission, later stated in a report published by the online news service Frontera NorteSur, that credit card debt is still not a "major problem. It's not at a critical stage."
Banks, he added, are working with cardholders to restructure debts. The report also states that 60% of bank-issued cardholders make only the minimum payment due every month and the percentage of all consumer bank loans considered nonpaying grew from 6% in 2006 to 10% by March 2008.
Mexican banks, virtually all owned by foreigners, have embarked on an aggressive credit card promotion campaign during the last several years. According to Bank of Mexico, an estimated 10% of approximately 13 million individual credit cardholders have eight or more credit cards with the average line of credit for each account is pegged at $2,800.