Mexicans turn to pawnshops as recovery disappoints

Thu Jan 13, 2011 3:29pm EST
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By Ana Isabel Martinez

MEXICO CITY (Reuters) - Jonatan Noyola may not be able to discuss the intricacies of the Mexican economy, but he knows one thing: the weak economy is forcing him to pawn his jewelry to fill gaps in a salary that just doesn't stretch far enough.

Even though the worst of the country's economic crisis appears to be over, millions of Mexicans are still queuing up at pawnshops to hock their valuables for a little more ready cash.

Loans made at Nacional Monte de Piedad, Mexico's largest chain of pawnshops and an official charity, reached a record 21 billion pesos ($1.7 billion) in 2010, and the industry association expects overall lending to rise 5 percent this year.

Noyola, a 28-year-old retail assistant, blames his financial difficulties on the domestic economy, which grew an estimated 5 percent in 2010 after a 6.1 percent dive in 2009.

Official forecasts are for a slowdown in growth to about 4 percent in 2011, and ratings agency Fitch warned on Tuesday Mexico's drug war, which has killed more than 34,000 people in four years, could weigh on growth and investment.

"I'm going to pawn my jewelry in order to pay for public transport and food. The situation is very bad and puts me in the embarrassing position of having to come here," Noyola said, while waiting in line at the Monte de Piedad in Mexico City's central Zocalo square, the country's oldest pawnshop, for a value assessment on a bracelet.

The culture of pawning was brought to Mexico by the Spanish conquistadors. Silver magnate Pedro Romero de Terreros founded Mexico's first Monte de Piedad in 1775 and within its first year, it had received visits from one in four of the capital's residents.

The institution says its interest rate of 4 percent a month is the lowest in the industry, with services aimed at the poorest members of society, who in many cases do not have bank accounts.   Continued...