Brazilian bank lending rose in December, led by higher demand from consumers and smaller companies that took advantage of the lowest interest rates in more than six years, the central bank said.

State and non-state bank loans increased 2.3 percent to 732.8 billion reais ($343.4 billion) from a revised 716.5 billion reais in November, the bank said in a report distributed in Brasilia today.

"Credit to consumers, mainly auto loans, and to small companies will likely still lead credit growth in 2007," Rodrigo Magela, who helps manage about 3 billion reais at Rio de Janeiro- based ARX Capital Management Ltda., said in an interview. "All the signs point to continued growth in credit this year."

The increase was the indicator's 34th consecutive monthly climb. For the full year, credit expanded 21 percent. Bank lending in Brazil increased every year since 1994, when a new currency curbed the hyperinflation that had stifled borrowing.

Individuals and companies have become more confident about borrowing because of lower inflation, rising wages and a decline in benchmark interest rates to their lowest levels in at least two decades, Magela said.

Credit to private companies was led by demand from agribusiness, mining and pulp and paper companies, the central bank said in the statement.

The overall average interest rate fell to 39.8 percent in December, the lowest since the start of data collection in June 2000. The rate fell from a revised 41 percent in November.

Monetary policy makers last week cut benchmark lending rate to 13 percent from as high as 19.75 percent in September 2005, in an attempt to boost growth in Brazil, Latin America's largest economy.

Total lending in Brazil represented in December 34.3 percent of the country's gross domestic product, an increase from 33.7 percent in November and 31.2 percent in December 2005, the central bank said.

(Published by Bloomberg, January 29, 2007)