In Venezuela, bank credit growth slows along with economy

Growth in Venezuelan bank lending fell sharply in the first six months of 2008 as the oil-producing nation's economy slowed. The contraction in lending follows a five-year surge in which banks flooded Venezuela with credit, helping to boost consumer spending and economic growth of 8.4 percent last year. An annual inflation rate of more than 30 percent has since forced President Hugo Chavez's government to hike interest rates to keep pace with soaring prices, putting a damper on both lending and growth. 'The financial system is beginning to reflect slowed growth in the economy,' said Oscar Garcia Mendoza, president of the Caracas-based bank Venezolano de Credito, who said he is particularly concerned with an increase in bank loans delayed or disputed by borrowers. Total loans by Venezuelan banks increased by 10.17 percent in the first half of 2008 to US$53.6 billion at the end of June — growing at one-third last year's pace, the Caracas-based consulting firm Softline Consultores said in a report released this week.