WHO WOULD PAY 50% INTEREST TO SEE MESSI?

ARGENTINIANS are so crazy about soccer that a lender bet they would pay 50% interest to finance their trips to the 2018 Fifa World Cup in Russia.

BBVA Banco Frances SA, the local unit of the Spanish bank, aired television commercials encouraging Argentinians to rally behind Lionel Messi and his teammates by taking out one of their seven-year loans.

The lender offered up to a million pesos (R527 000) payable in 84 instalments, with the added incentive that if you made all the payments you wouldn’t pay any taxes and fees in the final year.

Now, paying effectively 50% interest a year on a loan might seem insane even for a diehard soccer fan, but with Argentina’s inflation running at more than 25% and the central bank having pushed its benchmark rate to 40%, the BBVA offer looks less onerous.

High inflation is an incentive to borrow and make payments later when money is cheaper. BBVA Frances’s personal loans portfolio grew by 80.5% in the first quarter from a year ago as Argentinians flocked to take out mortgages and consumer loans.

“Such interest rates can seem crazy to anyone outside Argentina, but Argentinians have become experts at playing the inflation game and kicking the can down the road,” said Juan Alonso, an analyst who covers BBVA for TPCG Valores SA in Buenos Aires.

“An Argentinian doesn’t look at interest rates; they just ask about the monthly instalment they will have to pay. If they have the chance to pay off a trip to the World Cup over seven years they will take it.”

A representative for BBVA Frances in Buenos Aires declined to comment on the interest the bank was charging or the number of customers who used loans for travel.

BBVA Frances made 8 500 of the loans, lending about 1.2 billion pesos in total, since introducing the product in August.

The original terms of the loan offered a nominal annual interest rate of 32% which, with taxes and fees, implied a real interest rate of 46.38%. The bank raised the rate to 34% in March, taking the borrower’s financial cost to 49.85%.

La Albiceleste, or white-skyblue as the team is nicknamed for the national colours, is among the favourites to lift the trophy this year and has always counted on a passionate following to cheer it on. This year is no exception with Argentinians having bought 52 999 tickets, in the top 10 behind countries such as the US and Russia, of the more than 2 million sold, according to Fifa.

Taking out debt in instalments is a tried-and-tested strategy used by many Argentinians to get ahead of inflation. Loans such as the ones from BBVA Frances are also a key way for many to afford the tickets and travel after their currency plunged more than 25% this year.

The country is negotiating a credit line of about

$40 billion (R527bn) to help plug a budget deficit and calm investor concerns about the country’s economic outlook.

For now, fans can make the trip to Russia, where Argentina played its first game against Iceland in Moscow yesterday.

“A World Cup is a religious experience,” said Marcelo Bertolino, who travelled to Brazil in 2014 and was going with his son to attend several games in Russia. “This time it is going to be expensive because of the weaker peso and the distance, but it’s still worth the trip.” – Bloomberg