By Paul Day (Reuters)
Rodolfo Jaramillo looks around his Madrid apartment at the stacked stereo system and a picture of parakeets on the wall, and shrugs. It's been three months since he paid a mortgage instalment and he plans to return to Ecuador.
Jaramillo, 40, has lived in Spain for nine years. Over the last six months, he has lost his job in construction, his wife is stuck in Quito after her return visa was revoked and his two children, both Spanish citizens, have joined her.
Alone and jobless in Spain, he sees no choice but to leave his debts and go home.
"The bank has offered different mortgage terms, but I don't have the money. The moment I get rid of this flat, if I have to give it up or they take it, I'm going back to Ecuador," he said.
During Spain's boom years, banks energetically courted immigrants: now numbering around 5 million, some like Jaramillo are heading home. Those who stay have dwindling earnings to repatriate as competition for jobs rises and wages slip.
Similar situations are emerging elsewhere in Europe as an immigrant tide turns back from potential recession: there is anecdotal evidence some of the Polish workers who restored many British homes are returning, and Britain's Border Agency has said fewer eastern Europeans sought work in the second quarter.
"Last year, I was working on a housing construction site in Madrid for 1,800 euros a month. No one's building houses anymore and the few jobs left, if you can find them, pay 1,300 euros maximum," said Franklin Vallejas, 42, also from Ecuador.
Spain's economy is forecast to enter recession this year and construction, until recently a major source of employment for immigrants, has stagnated as the housing market imploded.
So far between one and two percent have returned to their home countries, according to a study by Luis Miguel Doncel, professor of economics at the Rey Juan Carlos University.
Money sent home by foreign nationals living in Spain fell 5 percent to 3.6 billion euros in the first half of 2008 from 3.8 billion a year earlier, according to the Bank of Spain.
International money transfers are one of the largest sources of foreign currency for Latin American countries such as Mexico and Ecuador: for both, income from citizens living abroad fell in the second quarter.
TARGET MARKETS
Loan defaults among Spain's immigrant community are also set to rise. According to a study by Javier Morillas, a professor of applied economics at Madrid's San Pablo-CEU university, over 90 percent of non-performing mortgages are held by immigrants.
Banks themselves provide no such breakdown of loans, but since immigration boosted Spain's population by more than 10 percent in a decade they must have taken many home loans.
The banks won the business through aggressive marketing campaigns, opening specialised branches in neighbourhoods with growing immigrant populations and pitching fiercely for slices of the lucrative money-transfer business.
Most active were the dozens of small, unlisted savings banks, or cajas — rather than Santander or BBVA — which registered steep growth over the last decade by targeting new markets among young people and immigrants.
Now many of their customers are struggling.
Total defaults by all mortgage holders in Spain in the second quarter leapt to 8.0 billion euros from 2.8 billion a year earlier, with the cajas holding the lion's share.
The Bank of Spain, which strongly denies the existence of a Spanish subprime sector, points out July's non-performing loan ratios of 2.14 percent are far short of levels around 17 percent faced by many U.S. banks.
"Immigrants in Spain are especially vulnerable to defaults in these times of crisis," said Maisa Urmeneta, head of studies at the immigrant research group, ECV Investigacion.
"They are the first to be affected by a slowdown. Many hold unstable employment — in this case in construction — and they don't have the social buffer the Spanish have. When things go wrong, immigrants don't have the family to fall back on."
Joblessness among legal migrants hit 16 percent in the second quarter, against 10.4 percent for the workforce as a whole.
GUARANTORS NOW JOBLESS
In their eagerness to lend to immigrants, banks often allowed foreigners to use their relatives as guarantors, even if their own economic position was precarious.
"Banks were offering immigrants completely different mortgages to those offered to the Spanish, with unheard-of and totally abusive conditions," said the head of Bank and Insurance Users Association, Manuel Pardos.
"Banks have often used family members as guarantors and demanded much higher interest rates," he said.
San Pablo-CEU's Morillas agreed collateral conditions applied to immigrants often differed greatly from those expected from the native population, but argued that the terms came more from necessity than abuse.
"Young Spaniards are often asked to use their parents' homes as guarantee against a mortgage loan. Loans to immigrants have not been offered with the same criteria, and that is why defaults are so high," Morillas said.
Jaramillo said he had no problem securing a joint mortgage with his wife and the backing of three guarantors — his brother-in-law, who sold him the flat, an aunt and a friend.
Monthly payments on the flat began at 900 euros a month, which seemed reasonable when the bank handed over the flat's papers almost two years ago.
Then Jaramillo was earning 1,900 euros a month and his wife, Ana Maria, 39, another 800 euros on a production line.
Almost two years later the monthly mortgage stands at 1,300 euros. Jaramillo receives less than 1,000 a month in unemployment benefit after he lost his job when a traffic accident forced him to take some weeks off.
Two of Jaramillo's three guarantors are also unemployed.
"I've offered the bank 300 a month, but they won't accept that," he said.
His compatriot Valleja's former employer had an alternative approach to his debts.
"He had three builders' trucks and he couldn't pay what he owed on them," he said.
"So he drove them into an empty lot, gave the keys to a caretaker and told him to give them to the bank if they came calling. Then he left the country."
