RIO DE JANEIRO, Brazil — For decades, Brazilians had so little faith in their banks that they kept most of their money at home and paid for appliances, cars and even houses in lump sums.
Financial tools that Americans take for granted, such as credit cards and affordable bank loans, seemed like science fiction in this 184 million-person country, where annual interest rates regularly soar into the triple digits.
Yet as Brazil enjoys a rare spell of sustained economic growth, millions of people are fueling an explosion in consumer credit and banking services that's transforming the world's 10th biggest economy.
For the first time, Brazilians are scooping up consumer goods on credit and taking on mortgages to buy homes. Total bank loans have more than doubled over the past four years, passing $530 billion, and banks have raked in record revenue. The banking system's assets grew by 19 percent in 2006 alone to hit more than $1.1 trillion.
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The growth has allowed middle-class Brazilians such as government employee Maria do Carmo of Rio de Janeiro to buy more, and it's fueled an industrial boom that's lowered unemployment rates and raised incomes.
Even Brazil's legions of poor are getting more access to credit, often in the form of microloans. Nearly four-fifths of payroll loans, which Brazilians use regularly, go to people earning less than $650 a month.
"Before, the income limits for credit cards were so high that only a very few people had them," do Carmo said at a branch of the country's biggest bank, state-owned Banco do Brasil.
"Today, everyone has a credit card. We use it to buy everything, which isn't always a good thing. My bills every month pile up to my chin."
The Brazilian boom draws a sharp contrast to the woes facing U.S. institutions, which are enduring a brutal downturn from the subprime-lending bust.
The United States buys more Brazilian exports than any other country, and a U.S. recession would hurt Brazil's economy. Nonetheless, most analysts expect Brazil's banking boom to continue at least through this year.
For one thing, the banking system still has a lot of room to grow. Bank loans equal only 35 percent of Brazil's gross domestic product, compared with 80 percent of the United States', and mortgage lending equals 2 percent of Brazil's GDP.
"This has opened up new frontiers for Brazil because, for years, no one had the confidence to loan to consumers," said Celina Vansetti-Hutchins, who heads the banking analysis team for Latin America at the ratings agency Moody's Investors Service.
"Banks are shifting away from their traditional role of financing the government to financing the private sector."
Officials at Brazil's biggest banks said their industry has turned the corner for good as domestic consumption charges ahead. Auto financing, in particular, has come into its own, making up a third of all consumer lending. Nearly 3 million cars were produced in Brazil last year, 14 percent more than the year before.
The banking industry also has been a global pioneer in tools such as electronic banking and payroll loans, which grew from $5.7 billion in 2003 to about $35 billion last year.
"We've learned how to work in moments of stress and in times of low volatility," said Marco Geovanne Tobias da Silva, Banco do Brasil's manager of investor relations. "The banks here are finally learning what it is to be a bank."
That new confidence is a product, many say, of economic stability that's allowed banks and customers to plan for the long term, a rarity in a country known for its bouts of hyperinflation and bank meltdowns.
The country's economy is estimated to have grown by as much as 5.3 percent last year, its highest rate in three years, as booming commodity exports and a stable currency helped Brazil record a $40 billion trade surplus. Inflation came in under 5 percent, and employment and foreign investment have reached record highs.
Brazil's central bank has responded by cutting its key lending rate to an historically low 11.25 percent, although banks still charge three times that to private lenders.
"We have a population that never accessed credit for cultural reasons," said Renato Martins Oliva, vice president of the Brazilian Banks Association, which represents small- and medium-sized banks.
"With our history, people had little trust in the system. But we have sustained growth now and a government that sees credit as key to growth."
That's drawn the attention of U.S. banks such as Charlotte, N.C.-based Bank of America, which in 2006 sold its BankBoston operations in Uruguay and Chile for a 7.4 percent equity stake in Banco Itau Holding Financeira, Brazil's third-biggest bank in total assets last year.
Itau announced Tuesday that it notched a record net profit last year of $4.8 billion — nearly double 2006's results — driven in large part by a spike in personal and car loans.
Total foreign investment in the Brazilian economy last year broke an all-time high, with about $35 billion pouring in. Brazilian banks are betting that more foreign investors will look at Brazil's expanding financial services market, especially as U.S. banks falter.
"We can arrive at a point where credit makes up 60 or 70 percent of the GDP, easily," said Milton Vargas, executive vice president of Brazil's biggest private bank Banco Bradesco. "We're a very big country, and we have a lot of potential."