Poor Spaniards Surrender Gold to `Mounts of Pity' Pawnbrokers
By Charles Penty
March 26 (Bloomberg) -- Jose Vega hands his gold chain to a jewelry appraiser in Seville, availing himself of Spain's six- century tradition of pawnbroking to pocket 260 euros ($406) he'll use to buy groceries for a month.
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``I come here when I owe some money or just need to eat,'' said Vega, 60, a
construction site guard who has been pawning jewelry to make ends meet since 2003. ``It gets me through the hard times.''
Pawnbrokers, known in Spanish as ``Montes de Piedad,'' or Mounts of Pity, after the piles of coins once donated to fund them, are so much a part of local culture that 25 savings banks offer the service, including
La Caixa and
Caja Madrid, the country's two biggest. The practice dates back to medieval times, when Franciscan friars used alms to help the poor.
Impoverished Spaniards are increasingly turning to pawnshops as jobs disappear and economic growth slows to the lowest rate since 2002. As ever,
the services attract those on the margins of society, including workers from Latin America, Romania and North Africa hired as manual labor during the decade-long housing boom.
The European Commission cut its forecast for Spanish economic growth this year to 2.7 percent, and unemployment claims have risen for the past five months.
``In times of crisis, traditionally the mounts are more active,'' said Francisco Aguilera, head of the 166-year-old pawnbroker run by
Cajasol, a Seville-based savings bank.
Gold Price
In 2006, the last year for which figures are available, mounts made 242,864 loans totaling 103.2 million euros, a 1 percent increase from 2005, according to the Spanish savings bank association. They valued more than 1.2 million items with a combined weight in gold of 10 tons and 14,400 carats.
As gold prices rise, more struggling borrowers are turning to the pawnbrokers. The price of gold has jumped about 40 percent over the past 12 months, with the value of a contract for immediate delivery reaching a record of $1,032.70 on March 17.
``From the start of the year, there has been more demand,'' Aguilera said of the current economic situation in Spain. ``We see it because
more people come to our windows with their gold.''
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In 2007, Cajasol lent 8 million euros to small borrowers, 8.8 percent more than a year earlier. Some 4 percent of the pawnbroker's 12.4 million euros of outstanding loans weren't repaid, forcing the bank to sell the jewels at auction.
Aguilera's team of six appraisers weighed 140,000 items last year. They typically offer loans equaling 70 percent of a piece's value after dabbing acid on a gold rubbing from the item to test authenticity.
Cheaper Loans
Customers, who range from businessmen to ``etnianos,'' or Spanish gypsies, can have their cash within minutes at
interest rates that now range from about 5.5 percent to 7.5 percent, he said. Those who take out multiple loans pay higher rates on subsequent deals.
Cofidis SA, a French consumer credit company that operates in Spain, charges about 25 percent for a 500-euro loan.
``For working people who are struggling or the poor it's a great resource,'' said Vega, the security guard. ``More people should use it.''
The mounts have always thrived in times of economic misery such as the Spanish Civil War, said Antonio-Claret Garcia, chairman of the National Committee of Spanish Mounts of Pity. (Tras una busqueda en google: ?Este tipo es o fue presidende de Caja Granada????)
The practice of providing loans to the poor through mounts can be traced back to the 16th century. The first Spanish mount was established in 1550 when the Count of Buendia left 300 ducats to provide loans to the poor in the northern town of Duenas, said Manuel Titos, a historian at the University of Granada.
Saints' Medals, Earrings
A priest, Francisco Piquer, founded Caja de Ahorros y Monte de Piedad de Madrid in 1702 using alms to fund loans for the destitute and masses for the dead. Caja Madrid is now Spain's second-biggest savings bank. Many of Spain's 45 savings banks came into being by providing mount services, Garcia said.
Latin American immigrants are also familiar with pawnshops, which were introduced to their countries under Spanish colonial rule, Garcia said. Nacional Monte de Piedad founded in Mexico City in 1775.
The catalogue for the Cajasol pawnbroker's March auction lists 446 lots, from saints' medallions and 203-year-old gold coins to an 8,000-euro set of emerald and diamond earrings. If a jewel goes to auction, the mounts pay the owner the difference between its original valuation and the sale price.
``When you go to the bank they make things so difficult with all the questions they ask and forms to fill out,'' said Luisa Gomez, a caregiver from Ecuador, after emerging from
Caja Madrid's pawnbroker, where he used rings and bracelets to secure a 600-euro loan. ``Here they just hand over the money, and it's cheaper.''
That easy access to credit is attracting those concerned about how they can survive as the good times recede.
``The mounts once had the stigma that it was only the truly destitute who used them,'' Aguilera said. ``More people are realizing there's no shame in coming here.''
To contact the reporter on this story: Charles Penty in Madrid at
cpenty@bloomberg.net
