Pawning Helps Pay for Pinata

Mexican pawnshops do a brisk trade year-round. But December and January are the busiest months. That’s when consumers pawn household goods to pay off extra bills. Others comb the aisles of forfeited merchandise looking for bargain Christmas gifts. Rico was disappointed with the $50 that she got for her lot. But her fiesta-financing scheme is more troubling for Mexico.

The nation’s economy isn’t expanding fast enough to generate sufficient jobs and prosperity for its 105 million people. Most Mexicans still lack bank accounts. Fewer than 15 per cent have credit cards. The world’s 10th largest economy runs largely on cash.

Mentioned in the Old Testament, pawnbroking may be civilisation’s oldest form of lending. Borrowers put up items such as jewellery, tools or musical instruments as collateral. A pawnbroker appraises the merchandise and typically loans about 50 per cent of what the assets would bring in a sale. The borrower agrees to repay the loan with interest, usually within a few months, to reclaim the goods. If the customer defaults, the pawnbroker keeps the merchandise and sells it.

Although pawnshops are multiplying around Mexico, the oldest and best known is El Nacional Monte de Piedad, known simply as El Monte to its legions of loyal customers. Founded in 1775 by a Spanish-born silver baron to help impoverished Mexicans, the institution has grown to 130 branches and 3,000 employees. Unlike its competitors, Monte de Piedad is a nonprofit. Its annualised interest rate of 36 per cent is cheaper than what many credit card companies charge in Mexico.

The crowd on a recent December afternoon represented a cross-section of Mexico: grandmothers in house smocks, students with backpacks and bellybutton rings, mothers with babes, office workers, and day laborers in work boots and paint-splattered pants. This year, Monte de Piedad will loan more than $700 million to 6 million customers, said Javier Velez Bautista, the pawnshop’s director general. Money earned above the cost of operations is distributed to charity. ‘‘There’s no other financial institution that is as important to the poor in Mexico,’’ Velez said. Indeed, a 5 1/2-month strike by the institution’s unionised workforce that began in December 1997 caused such hardship that Mexico City’s mayor intervened to settle it.

Despite its long lines and short hours, El Monte has developed an almost cult-like devotion from longtime clients such as Ofelia Perez. The 56-year-old has been without steady employment since losing her job as a secretary 15 years ago. She has worked sporadically cleaning houses ever since. Fingering a handful of pawn slips, Perez said she had lost track of how many times she had borrowed against her jewelry. With Christmas approaching, she said the need was greater than ever. ‘‘I thank God or this place,’’ she said. ‘‘We poor people have no other place to turn.’’