July 9, 2020

26% of Chileans are delinquent and contract new debts to pay previous

26% of Chileans have overdue debts, which means that a total of 4,604,770 people are declared delinquent throughout the country, the majority to deal with "education or health debts", Efe sources told experts in The matter.

"These defaults not only correspond to a due date, but on average it is accumulated without paying a total of four to five debts from different institutions," explained economist Marco Kremerman citing the latest study published quarterly by the University of San Sebastian in collaboration with the Equifax consultancy.

These maturities lead to a spiral of debts: "New loans are being contracted to face the pending payments, a situation that in Chile is known as the bicycle", said the economist of the Sol Foundation, who is investigating the state of the economy in Chile.

It is estimated that there are "82% of indebted elderly people in the country, more than 11 million (in a country of 18 million inhabitants)," added Kremerman.

The debt affects both the rich and popular sectors, but there is a "segmentation" in terms of the origin of the credit and the institution with which it is contracted.

In the higher income groups, they contract with the bank to finance "business, houses or cars", while in the poorest sectors the debt is directly with the "shops," retail, "for the purchase of food or clothing", he added.

"More than half of the group of defaulters has debts with retail, student loans or linked to health contingencies," Kremerman explained.

For this economist the debt operates as a "complement to low wages".

50% of workers in Chile earn less than 350,000 Chilean pesos net (about 510 dollars), as established by the last Survey of National Socioeconomic Characterization (Casen) published in 2018 by the Government.

"Today is a very low average salary for Chile.The economy of the country has had a great growth in the last period but has not been covered through the salary increase, which on average grows 2.3% annually, while household debt rises almost 10% per year, "added Kremerman.

From the Sol Foundation have found an increase in debts in people over 60, "due to the ineffective pension system", and in the youngest for "university loans."

Fifteen years ago student credit was established with the State's endorsement and many Chileans have access to higher education with this option.

"Of the 480,000 students who are currently paying, 192,000 are in default: they can not pay the debt," Kremerman said.

On the origin of this great indebtedness, the economist maintains that there may be "lack of knowledge of how interest, commissions and credits operate", but that it is fundamentally due to "low wages".

The large accumulation of debts led in 2014 to the approval of an act of liquidation of assets for individuals or companies in an insolvent situation.

Through two procedures people can renegotiate – in case of having two or more debts for a value of more than 2.2 million pesos (about $ 3,200), among other requirements – or directly liquidate their assets quickly to pay to the creditors.

In the first semester of the year, 3,000 people and companies have availed themselves of this procedure promoted by the State, according to the Superintendence of Insolvency and Re-entrepreneurship.

From this organism they have initiated several campaigns of diffusion so that the people drowned in debts know this option, that serves like last resource to liquidate all the expired credits.

(tagsToTranslate) Chilean (t) defaulters (t) contract (t) new (t) previous

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