Many borrowers use cash for basics

By Teresa Puente
Tribune staff reporter

MEXICO CITY -- The appraiser held up the gold pendant adorned with the face of Christ, and informed Joel Alvarez that he would give him 4,300 pesos for the
family heirloom.

Alvarez needed the money, about $460, to make his monthly car payment. Pawning the pendant, the 21-year-old bank teller explained, would be a better deal than
applying for a loan at his bank or using a credit card.

"It's easier and faster to get a loan here," said Alvarez, who has pawned and bought back the same gold pendant four times.

Alvarez has plenty of company these days, as the slowing U.S. economy puts a drag on commerce south of the border. He is one of many Mexicans caught in the
downturn who are increasingly seeking out short-term loans to pay for basics such as groceries, rent, hospital bills and school tuition.

Among the most popular lenders is a non-profit chain of pawn shops aptly named Nacional Monte de Piedad, which literally translates as National Mountain of Pity.
The chain, known for an unorthodox business model that pays dividends for charity, expects to attract 8 million customers this year.

The Mexicans flocking to Mountain of Pity are a tangible sign of an economy caught in a familiar bind. When U.S. business flourishes, Mexico does, too. But when
Mexico's largest trading partner falters, the Spanish-speaking nation is vulnerable to sharp downturns.

Last week came the news that Mexico's economy skidded in the third quarter to post its first contraction in nearly six years.

The finance ministry said gross domestic product fell 1.6 percent in the third quarter compared with the year-earlier period, dampening growth for the first nine
months of the year to just 0.1 percent. The drop was the first for Latin America's No. 2 economy since a botched peso devaluation in 1995.

Not long ago, Mexico was firmly back on track. GDP grew a robust 6.9 percent in 2000, with 85 percent of exports going to U.S. buyers.

But these days, Mexican industries from autos to airlines are bracing for cutbacks. The worldwide slump in travel and tourism, especially the loss of U.S. tourists in
the wake of the Sept. 11 attacks, is likely to produce enormous losses.

Meantime, business along the U.S.-Mexico border has suffered as fear and long lines due to extra security are keeping consumers at home.

It's an alarming trend, said Roberto Aguilar, an economic analyst and adjunct editor with the Mexican magazine Expansion.

"We run the risk of losing the economic stability we have gained in these last months," he said.

Quoting a famous phrase referring to the close links between U.S. and Mexican fortunes, he added, "If the United States gets the flu, Mexico gets pneumonia."

Predictably, those hard times are spawning new business for the pawn industry, and Mountain of Pity is in the middle of a major expansion. The chain, which has 43
locations across Mexico, plans to open another 16 by the end of this year.

15 percent growth seen

Loan origination, which has run around $350 million annually, is expected to grow 15 percent in 2001.

The pawn centers are attracting Mexicans from all classes of society, making loans on everything from electronics to washing machines and even cars. As a rule of
thumb, the loans equal about 50 percent of the value of the pawned item. Interest rates are around 3 percent a month.

No question, Mountain of Pity fills a need. Ever since Mexico's 1995 peso crisis, banks have been slow to resume consumer lending. There's more of a cash culture
here and people like the ease with which they can go to the national pawn shops.

"It's immediate, in cash, without paperwork and the interest rates are very low. They are competitive in the loan market," said Gustavo Mendez, spokesman for the
institution.

Founded in 1775

The concept of Nacional Monte de Piedad dates back to Spain. It was founded in Mexico by Pedro Romero de Terreros in 1775.

"[He] founded Monte de Piedad with the idea to help people with their economic needs. Today, after 226 years, Monte de Piedad follows the same philosophy,"
Mendez said.

Indeed, the institution donates all its declared profits to charity, and last year gave away $150 million to help fight cancer and AIDS, among other causes. It receives
no government support.

The non-profit's central office is in a colonial building at the center of Mexico City. That location accepts only watches and jewelry, but other locations across the city
and country are strewn with appliances, automobiles and the like.

"The institution accepts just about everything except for animals and perishable goods," Mendez said.

Vast majority buy back items

Customers can pawn their goods for anywhere from 4 to 13 months. And 96 percent of the clients buy back their merchandise before the loan expires.

Ricardo Esquivel recently lined up in the lobby to sell a simple gold bracelet. He needed the money to help pay the hospital bill for his wife, who was expecting a
baby and doesn't have health insurance.

"I have to collect as much money as I can," said Esquivel, 28, an industrial mechanic at a factory.

He got about $30 for the bracelet, which was a wedding present for his wife. But this wasn't his first time at the pawn shop. Last year he pawned a stereo system for
about $150.

"I didn't get that one back," Esquivel said.

Adriana Alfaro said she seeks loans at least once a month. She went back to the Monte de Piedad recently to pay off a $100 debt on gold rings and necklaces she
had pawned. She needed the money for her daughter's school expenses.

She, too, is intending to reclaim her possessions rather than give them up to the pawnbroker. "I don't want to lose them," said Alfaro, 42, who sells award plaques for
a living.

She said she would rather pawn her jewelry then ask relatives to lend her money, or go to a bank.

"Here they give you a good interest rate," Alfaro said. "It's a safe way to get money fast."

Maria Luisa Vega carried gold hoop earrings and some bracelets in a small plastic sack. She needed about $40 to buy groceries and medicine.

"Look at all these people," said Vega, 67, standing in one of about six lines of people waiting to have their jewelry appraised. "A lot of people are needy right now."

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