“Buy a car, Perico!” Is the phrase of the most unforgettable commercial of the eighties. “I didn’t even move from my desk,” says an iconic spot from the 1990s. Both advertised the same product.
It is that the Chilean economy manufactures few things (not even vaccines we are able to do, since the closure of the only plant, in 2002). But there is something that we do sell in quantities: money.
The spot starring Nissim Sharim and Delfina Guzmán was not a commercial for automobiles, but for consumer loans from Banco de Santiago. In the era of “sweet silver” and the dollar fixed at 39 pesos, Pinochet promised that, thanks to credit, “by 1985 or 1986, every Chilean worker will have a house, car and television. It will not have a Rolls Royce, but it will have a citron of 75 ”.
“Gerardo Baeza never thought of having a credit card”, part of the Financial Condell spot, in which an office worker describes the benefits of his Visa Condell card (“with it I can buy everything I want and where I want, I even have cash advances ”), Under the motto:“ we give credit to working people ”. “And it’s not just for the boss!” Adds a young Baeza office employee as he proudly shows off his own card.
Chile was moving towards democracy and the authorities celebrated the “democratization of credit”. Since then, the Chilean debt has continued to increase. If in 2003 households owed close to a third of their income (36.5%), in 2007 they exceeded half (56.7%), in 2016 two thirds (67.5%) passed, and in 2019 we already arrived to a record high of 74.5%.
Chileans have never been so indebted as today. And late payment goes hand in hand. Almost 5 million people accumulate unpaid debts. The average default is close to $ 2 million, in a country with a median salary of 400 thousand pesos.
For the dean of the San Sebastián University, Gonzalo Edwards, “people get into debt, not because they get into debt, but because they get into debt. The main person in charge of getting into debt above what they can pay is adults over 18 years of age ”.
But everyday reality is very different. Retail sells money. Buying cash is increasingly difficult, in the face of the bombardment of exclusive offers for cards, which punish those who insist on not getting into debt with higher prices. Usurious interests disguised as “commissions”, tied sales of insurance, and “signing” of contracts that are never in sight, are some of the irregularities denounced by Sernac and consumer groups.
“There is irresponsibility on the side of the supply of credits, because they know that a percentage is not going to pay them, but even so it is still profitable because the rate they charge is usury,” says the economist and general manager of Gémines, Tomás Izquierdo.
Buying on credit is no longer just a reasonable alternative to purchasing durable products (Perico’s car), but a necessity to consume food or medicine. In fact, financial retail is the sector with the most defaulters. “That is an indicator of merchandise, medicines, cash advances to make ends meet,” says Mario Espinosa, Defense Debtors lawyer.
“The proportion of indebted households, particularly in consumer loans, is higher than what is observed in other countries,” admits the president of the Central Bank, Mario Marcel. Among the most delinquent groups are older adults, pushed into debt by dilapidated retirements.
The picture is very different for the State, which with a debt of 29% of GDP, maintains “levels of public debt that are among the lowest in the world. Globally they are around 100% ”, says the doctor in Economics Andars Uthoff.
By the way, it is very good that Chile has a low public debt. The part of the story that is often hidden is that this has been done at the expense of the people. While the State was saving, citizens went into debt to study, survive on starvation pensions, pay for their family’s health or buy medicines: that is, to cover the social benefits that the State denied them.
We suffer the consequences today. If the 1982 economic cataclysm found a state and companies in debt, this time the tsunami wave directly hits people who already had water up to their necks. While the solvent State of Chile enjoys practically zero rates in the international market, its inhabitants face this debt crisis at unprecedented levels, to buy on credit at the supermarket or pharmacy.
It is this drama that makes the proposal to withdraw 10% of the AFP funds so popular. Before talking lightly about “populism”, it is necessary to understand how, for four decades, Chileans have heard that they are the owners of their pension funds, while in real life they must borrow exorbitant interests to cover their basic needs.
As former President Lagos once explained. “That money is deposited in a bond of some retail company and they pay UF + 5%. Then you put on your consumer hat and go to that same retail company, ask for a loan and they charge UF + 30% ”.
Is it surprising that people demand their money instead of continuing to accumulate credits on leonine terms?
As state aid focuses on low-income sectors, the debate opens about how to help a large proportion of the middle class who remain idle and empty pockets. Freelancers with incomes over $ 100,000 per person are offered a soft loan by the state of up to $ 650,000, and a loan for individuals is expected to be extended.
As an emergency measure it may be reasonable. The problem is that it hits an already bleeding wound: debt on debt.
Thus, it can become a new symbol of the powerlessness of a State that denies basic social benefits and, instead, limits itself to being a comprehensive lender.
That, to put it in one sentence, does not treat us as citizens, but as customers.
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