New Internationalist

Give them credit

Issue 392

Whoever thought loans were linked to income hasn’t experienced the credit card’s true potential. Lezak Shallat reports from Chile.

Gimnasia bancaria – bank gymnastics – is a widespread exercise-routine and a legitimate excuse to arrive late to any mid-morning meeting in Chile. It involves something that can quickly work up a sweat – juggling funds between accounts. And its popularity flows from the bank and department store credits that are allowing almost anyone to live beyond his or her means.

Many people no longer view debt as a repayable, finite concept but as a permanent condition akin to indentured servitude. The combination of low salaries and high monthly payments is breeding a frightened workforce living off tomorrow’s earnings.

Typical of the architecture in any mid-sized Chilean city is the central Plaza de Armas – several bank clusters adorned with a battery of ATM machines, armed guards and lofty, interchangeable names like ‘Development’, ‘Investment’ and ‘Security’. Within driving distance are those glass and chrome temples of the consumer society – the malls. Yet while only a small segment of the populace has money to burn, Chile’s malls are churning with people waiting for their chance to partake of the feast.

Hemmed in by high-rises branded in neon, choking under a blanket of smog, Santiago, the capital, is the hub of this frenzy. The city’s magnificent Andean backdrop disappears behind a forest of billboards selling shampoos, mobile phones, banks, beers and cigarettes. Poverty here used to be more threadbare. Today it is cluttered with plastic. Food and a roof no longer define the minimum. Most people would also include as necessities a mobile phone and a TV – connectivity that can be purchased by instalment.

It is easy – indeed tempting – to confuse this consumption with participation. Or maybe the market can somehow transform shoppers into citizens who don’t feel marginalized and instead identify with modernity and progress.

Micaela, a chatty woman from the countryside, spent 28 years on this earth without a telephone before buying two mobiles – one for herself and the other for her large family back on the farm. Then the phone company offered her a landline. Never mind that she didn’t need it and had already run up large unpaid bills on the two phones she already had, both of which had been cut off for non-payment. For Mica, the telephones were powerful symbols of having arrived at a new level of social and cultural attainment.

Consumed by consumption

Most people don’t earn enough money to pay for the consumer lifestyles being dangled before their eyes on TV screens, billboards, newspapers, mobile phones and laptops. To feed the shopping binge, they look to that universal token of membership in the consumer society: the humble credit card. Department store credit cards (and, increasingly, department store banks) cater to the low-income customers whom banks may refuse. Monthly payments with a slab of plastic are the way that 50 per cent of Chileans usually pay for their goods.

I consider it a success if I get through the month without adding to my bills, let alone pay them off. And that’s just the basics, like food and rent,’ says Marcela, a teacher.

Marcela is not alone. A November 2005 report by the governmental regulatory agency Superintendencia that included a survey of 1.9 million bank clients, found that bank debtors on average spend 20 per cent of their monthly incomes in paying off consumer loan balances equivalent to 7.5 months of salary. The report concludes: ‘At the lower income levels, financial charges appear extreme, especially considering that housing, education and other expenses that can be an important part of disposable income, are not taken into account [in these loan repayments].’

Debt is a national household malaise. Four out of ten Chilean workers ‘suffer’— in terms ranging from ‘worry’ to ‘desperation’ — over repaying their debts, reports a recent study by a Santiago business school. Half hold doubts as to whether they will escape the burden of payments and loans.

Poverty here used to be more threadbare. Today it is cluttered with plastic

So why overspend and get into debt in the first place? For a start, it’s impossible to ignore the marketing blitz for banking services. The best TV ads feature charming losers in debt up to their ears, and darling children asking Daddy for gifts. There’s easy credit for students, and even easier credit for young singles who hearken to the ads’ seductive cries of ‘Me! Now!’

And there are other reasons. For many people, consumption is a substitute for affection – a consolation for the vortex of modern urban life. Some people shop to fill a void; others to create one.

It’s all about envy and outdoing the next guy,’ thinks Manuela Gajardo, a shopkeeper in a lower-middle-class neighbourhood. ‘It’s amazing how far out on the edge some people will go to trump their neighbour’s mobile phone.’

Ignacio Larraechea, director of the Center for Business Services of Santiago’s Universidad Central, explains it in terms of arriviste anxiety and the ‘colossal’ disparities in wages created by the economic model: the poorest 10 per cent receive under 2 per cent of income and consumption while the richest 10 per cent take home 47 per cent.

Statistics like this are often hidden by Chile’s outward appearance. Across the region, the country is viewed as an economic tiger, a trendsetter and a model of successful neoliberal economic policies – a triumph of the open market, foreign capital and privatization. With its fiscal sobriety and record-breaking copper bonanza, the economic health of the country appears sound.

Which is more than can be said for the financial and credit health of its consumers.

Journalist Lezak Shallat has lived in Chile since 1982.

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