Mexico's credit hangover

Credit card delinquencies are surging in Mexico, another sign that the economy is feeling the pain of the U.S. slowdown.

Tardy balances accounted for 6.9% of outstanding credit card debt in December, according to the latest figures available from the Bank of Mexico. That's the highest level in six years. Past-due balances totaled just under $2 billion at the end of 2007, up a whopping 68% since December 2006.

Banks and other businesses that provide information to Mexico's Credit Bureau are reporting that 39% of their cardholders are at least 30 days late on their payments, according to a report in the national daily Reforma (subscription required).

It wasn't hard to see it coming. Mexico has experienced an explosion of consumer credit in recent years. Emboldened by the nation's strong recovery from its mid-'90s financial meltdown, banks and retailers have rushed to issue credit cards to practically anyone with a pulse.

Mexico has no laws capping rates and fees, so the business has been immensely profitable. Average card rates in Mexico top 30% annually; some charge annual rates in excess of 75%.

The binge helped fuel sales of cars, appliances and other goods. But millions of consumers are now in over their heads. We'll see if the banks are as eager to work out repayment plans as they were to issue the expensive plastic.

-- Marla Dickerson in Mexico City