The Real Algarve

Easy credit, impossible life

It’s nothing new to say “at this moment in time, the Algarve is going through a tough time.” This is the conclusion of Ana Pedro, the lawyer in charge of DECO’s overloaded consumer support centre in Faro. Dotted throughout the country, these centres are geared towards supporting consumers and helping them resolve their credit issues. In practice, they come up against difficult situations every day. The origins of these situations go back to way before the turbulence caused by the international financial crisis. They’re actually easy to pinpoint: the arrival of large shopping malls in the region signalled the arrival of ‘easy access’ to all sorts of goods and services. For many, there was no need to pay up-front. “This way, people were hoodwinked into the illusion of ‘easy credit, easy money, easy life’.” Recent years have witnessed the ‘dematerialization of money’ she explains. “Suddenly, it’s been possible to buy everything that comes to the Algarve. The most up-to-date furniture, designer clothes, high-tech equipment and telephones - all at apparently accessible prices when in reality, they’re really not accessible at all. There’s been huge pressure to sign credit deals associated with the purchase of particular products. People see the initial payment as something that’ll always stay the same – but, because of the crisis and excessive increases in interest rates, what’s happened is that payments go up and leave people unable to meet the agreements they entered into,” Ana Pedro continues.

Keeping up with the Jones’

Or what here is called the ‘Culture of Comparison’ is the root of most of the Algarvians’ money problems. Why? “Because people have become used to thinking that anything and everything the neighbour has, they have a right to, too. I notice a lot of this in the section we have dealing with people in debt – when we ask them to fill out a form. It’s a type of mental gymnastics to get them to see their expenses and income. Then comes the moment when many tell me, desperately, that they haven’t got enough money to buy food. I look at their form and see, for example, their expense on cable television – on average € 50 or more. So, then I ask them why they don’t use this money to buy food? They become indignant – as if this was an essential prerequisite of their lives.” Unfortunately, “we live in a culture of comparison, concerned very much with social status,” she concludes.

Is the crisis the same for everyone?

The status trap is one of the main reasons for bankruptcy… DECO’s female lawyer has no doubt that the showy displays of the nouveau-riche, strutting their stuff throughout the Algarve (and the country as a whole) have their days numbered. The falls from grace have already begun. “There are many families here in Faro who have been living well for many years – many with incomes from businesses which are now in trouble. They are people who’ve become used to having the “latest model of plasma TV, the latest model of luxury car,” she continues. “But, be warned, these are people who today are turning to us for help… people who don’t even earn the minimum wage. It’s the upper-middle class who is suffering the most in this crisis,” Ana Pedro tells. Because the more one has, the more one spends. Soon, many people will have to correct that reality – change the way they’ve been thinking. “It’ll happen… people are already realising the negative consequences of the way they’ve been running their lives.”

The Mortgage Trap

Added to excessive consumerism – with interest on personal credit reaching astronomic levels and the obsession for ‘showing off’ aggravating problems, there’s another social drama overshadowing many Algarvians. The mortgage trap. “2009 is going to be a very difficult year. 2008 saw many situations where people simply couldn’t make their mortgage payments. So many in fact, that banks tended to pass the cases from department to department – they simply didn’t know how to react to the problem. I’ve got people coming to us today who’ve not met their mortgage payments for a year – and the banks still haven’t reacted. This is because they’re not property speculators and it’s really not in their interest to be saddled with lots of properties. But these situations aren’t going to go on for much longer. 2009 will see the ‘resolution’ of many of these issues.” And then? Where will these families live? Will they be able to rent a home? The lawyer laments the lack of alternatives. “We’re in the Algarve, next to the coast. The rents here have nothing to do with the rest of the country. Landlords think: ‘Shall l rent out in the summer, at a premium rent?’ or ‘Shall I rent out for the rest of the year, at a high rent?’ Either way, we all suffer.” Many people arrive at DECO’s offices with keys to houses they can no longer pay for. The majority are young people. But not all of them. “What’s also happening right now is that a minimal change in the number of people in a family unit completely destabilizes the management of the family budget.”

Soft targets

Without wanting to give details, Ana Pedro expresses her concern – “there are companies who are reducing their contracted staff’s wages by 25%, telling them that otherwise they could risk losing their jobs altogether.” Although illegal, it’s a tactic that’s becoming more and more widely used – and could cause yet more suffering to those already on low wages. Another pitfall is the current market ‘trend’ of ‘offering’ language courses. “The operators behind these courses, which are sent to people by post, know full well that we’re in a time of crisis – with many people unemployed or being laid off. They know that these people want to be valued as professionals and may well consider investing in one of these courses.” But the reality is that these courses are simply another credit trap of ‘astronomic proportions’. Elsewhere, there are still the unfortunate individuals who fall for the classic credit traps: “Orthopedic mattresses and ‘miraculous’ holiday credit cards which come with huge interest rates, still haul in victims every year. This year, DECO has also witnessed the drama of many old people losing their savings invested in businesses that have collapsed. From January to 14th November 2008, Faro’s DECO branch dealt with a total of 1.187 cases of people appealing to them for their expertise.