RIO DE JANEIRO — The sign outside this modest hair salon in the Rio das Pedras favela, or shantytown, of Rio de Janeiro reads "Belos Fios" ("beautiful hair"). Inside, customers can find Matrix hair color products stacked behind the salon's two only chairs. This is just one of some 30 small salons, most of them undeclared, that Carlos Renato visits regularly. A former driver, he's now one of the 60 micro distributors L'Oréal supports to sell its most affordable professional hair care products in the poor neighborhoods of Rio and São Paulo.
Launched in 2012, this program is part of L'Oréal's corporate social responsibility strategy, and it has received support from Santander bank and Sebrae, the Brazilian micro and small business support service.
"The project is there to help those who want to get by while at the same time giving the population access to quality products," explains Tatiana Peczan, head of the program for L'Oréal. In total, almost 2,000 hairdressers are supplied this way.
Candidates are selected by the company, which prefers people with trade experience and who are well-integrated in their communities. L'Oréal then teaches them all they need to know about the products. Sebrae offers them management classes, while the bank provides them with microcredits to get their businesses started.
Giving management classes in a Rio favela — Photo: L'Oréal Matrix
In the beginning, Renato received a stock of 100 products, an investment worth 2,000 reais ($750). "Now I earn three times more than I did with my former job," the young entrepreneur says. Some haven't been as lucky, and the project has had about 10 failures, mostly caused by shops that ultimately didn't pay for the products.
"It doesn't happen a lot, though, because the whole system is based on trust," Renato explains. "And with word of mouth, everybody knows everything in favelas."
Hairdressers can order products by the unit. Prices are 10% to 20% cheaper than usual Matrix products, because micro distributors have fewer costs than traditional channels. Eduardo, who has a much bigger salon on the main street plus an employee, believes he has managed to keep his customers because of the high-quality products. And because there is fierce competition, he has capped his prices.
For now, L'Oréal has limited this strategy to Brazil's "pacified" favelas. But if the popular distribution method, which is still being evaluated, turns out to be viable, L’Oréal says it could easily export it to other developing countries.
Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.
SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.
The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.
It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.
Seoul housing prices top London and New York
In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.
According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.
Average home loans are equivalent to 270% of annual income.
One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.
According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.
Playing the stock market
At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.
A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."
In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.
42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s
Game of survival
In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.
But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.
This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.
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