Predatory Lending and Social Movements: Brazil and US Human Underdevelopment Focusing Real Estate Debt

2018

In Brazil, thousands of people have used their entire savings on homes they will never own. New residential buildings remain uninhabited in essential areas of Brazilian cities. Bertran shows that intentional lack of austerity in the analysis of real estate financing has a critical responsibility for this scenario. Granting credit to people who could not afford it resulted in breached contracts worth vast sums of moeny and the large-scale recovery of properties used as collateral.

Bertran bases her argument on public data on real estate and household indebtedness, specialized literature on the management of construction companies, journalistic data on the breach of financing contracts, and judicial decisions.

The results indicate that the supply of real estate financing in Brazil for people who could not fulfill their contracts depended on at least three kinds of stimulus: high brokerage rates, promises of high returns to investors of real estate companies, and increasing real estate prices made possible by excessive credit.

While the diagnosis for Brazil has been reasonably formalized, the differences and similitudes with American subprime credit remain to be understood. Are the factors responsible for the Brazilian housing bubble the same as those of US subprime crisis? The research suggests that only in part.

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