Traveling Salesman

Efraín Vega is a light-brown skinned traveling salesman in Nicaragua. We are sitting on the same bench waiting for a bus to take us to San Carlos, a southern city of 20,000 people. He is tall and lean and has a solemn, thoughtful face. He is shuffling through a stack of lined index cards, maybe counting them or maybe reviewing whatever is written there. I decide to ask him about it and he begins telling me his story. He is living with five other men in a shack next to a bar in San Carlos. His wife and three kids live ten hours away by bus, but he visits them on the weekends. He spends his days taking buses to rural communities to sell household goods like plastic clothes hampers, dishware, and picture frames. If they want bigger-ticket items he can get them things like microwaves and refrigerators. They get the product right away and pay for it in weekly or biweekly installments, maybe $2 at a time. Efraín in turn charges more than the product costs to cover his travel expenses and interest on the credit that he is extending in the form of, say, a $20 foam mattress. From the two examples he gave me, and because he said that most items were similarly priced, it seems that he charges an average of 250% of the cost of the item. This includes the costs associated with bringing the product out to the people, but still represents an interest rate of anywhere from 50-100%, levied on some of the poorest people on the planet.

In the US there are many laws designed to protect consumers and borrowers from predatory lending, which is often defined as imposing unfair and abusive loan terms on borrowers. In Nicaragua most of this type of business is informal and thus not subject to regulation or protection. But is what Efraín doing predatory? The average annual per-capita income in Nicaragua is $1,170, and in the rural areas where Efraín works it’s lower. So is he taking advantage of people who don’t have many options, or is he providing a valuable service? I didn’t know the answer, so I asked him to help me understand the situation a bit more. Here’s what I learned.

Efraín and about 40 other men work for one of several similar businesses based out of Ciudad Darío in Leon (NW Nicaragua). Each business has a warehouse of products and the salesmen choose the products that they think they can sell and head out somewhere in the country to find families who don’t have regular access to a market where they could undoubtedly buy the products for much cheaper. The business takes 70% of what the salesmen take in and they pay for all the products and store them in Ciudad Darío. I asked Efraín if the salesmen are responsible for the losses, but he said that the first time a customer ‘steals’ from the company, the business absorbs the loss, but if they continue to sell to that person they are responsible for any future losses. He also said, however, that if a customer doesn’t pay for something more valuable, like a television, that he will have to repossess the item.

     “So do the police back you up?” I ask.

     “No, not at all. We have to keep asking them to pay or take it back.”

     “But what if they don’t give it back?”

     “I have the receipt that they signed, so they have to,” he explains.

     “But what if they refuse?”

     “Then I have the proof that they have to pay,” he answers, looking perplexed at my line of questioning.

     “What if they lock the door?” I say, trying to understand if or how people refuse to pay.

     “Well, sometimes they move, and that’s pretty common, but otherwise I have to fight them.” He reflects.

     “You fight them? Can’t the police help you?” I ask.

     “No, not at all. In fact, we sell to a lot of police officers, so they probably wouldn’t even let us in the police station. One time I got in a fight with a guy stealing one of the products and they threatened to throw me in jail.”

Efraín’s cut from the deal is the remaining 30%. From this he must pay all of his transportation, food, and housing costs as well as send money back to Ciudad Darío to support his wife and three small children. He has a 3 year-old and 5-month-old twins. He says he needs to gross about $340 per week in sales to stay above water. That gives him about $100 each week. About half goes to pay for his food, travel, and lodging. The rest he saves to support his family.

     “It’s still not enough to pay all the bills,” he says. “I work at home on Saturdays, Sundays, and Mondays.”

     “What kind of work do you do at home?”

    “I have some land. I grow beans, wheat, and corn.”

     “Do you make much money from that?”

     “Not really. You know, fertilizer is expensive and I have to hire help to plant everything.”

He explains that his farming costs are in the ballpark of $250 to plant his 8 acres of land. Then, for three months he has to bear the costs and keep spending money on pesticides until he harvests. He doesn’t even sell the produce. He stores it and they eat what doesn’t go bad.

     “You lose money if you try to sell your produce,” he says, “because you end up just spending that money on food, and food prices go up all the time. Cattle are the best investment. All you have to do is let them loose on your land and you can milk them every day to generate income. Everyone wants to own cattle.”

So Efraín lives far from his family, travels all day, and has to convince people that they need products and then that they should continue paying him every time that he comes to visit. He works hard and can’t spend much of his salary on non-essentials. He’s not alone, either. I see men like Efraín all over Nicaragua. They’re always waiting for buses, shuffling those cards that keep track of who bought what, who owes what, who’s paid what. They’re walking on dusty roads far from pavement, mattresses stacked on their backs.  A fellow volunteer here has written a very interesting analysis of the sector and it seems that it’s the Nicaraguan equivalent of a flipping-burgers kind of job here; it’s not much, but for many it’s the only viable option. So is it good or bad for the country?

Well, based on how many people continue to do it, the model seems to be working. It’s likely better than the employment alternatives that are available for many Nicaraguan men. It also seems that people in rural or isolated communities are willing to pay a premium for the ability to get convenient products and pay for them little by little. One must wonder, though, how much human nature is overriding good judgment when housewives or single moms with scant disposable income spend two or three times what something costs just because they get immediate benefits in exchange for vague and distant costs. It’s the same problem that many young consumers have in the US when they get their first credit card. Benefits up front and costs down the road is a recipe for irresponsible choices, especially here, where there are no enforceable consumer protection laws and no financial literacy programs.

Still, who are we to decide what these women (I say women because it actually IS women in the homes in this country) should spend their money on? Maybe they really don’t have the ability to go out to get what they need and the convenience makes it amply worth the price. Maybe the way that they generate income is more amenable to making periodic small payments and they simply have no other way to purchase things. Maybe enough of them don’t actually pay back the full amount that what others pay subsidizes what the truly indigent can’t afford. The nearly-poor helping the truly-poor.

Maybe the flexibility of the payments is valuable. Efraín says that when people don’t have the money one month, he just comes back the following month. There are no credit scores getting ruined, at least not formal ones. He builds relationships with people. Maybe we’ve been so busy in the US packaging up our debt and selling it off to pension funds that we’ve forgotten the value in personal interactions. One thing certainly is clear; the people in rural communities don’t have many alternatives.

Another thing is clear: Efraín is not some scheming capitalist lining his pockets. He’s just an ordinary Nicaraguan trying to support his family and make it from one year to the next. It’s possible that the companies back in Ciudad Darío are making a lot of money, but they seem to bear the brunt of the risks involved and if they’re all based out of the same place I imagine they have to compete with each other for workers, so maybe not. I guess that all I can conclude is that nothing is black or white, here or anywhere else.

As the bus pulled up to our stop, we walked together around the back door of the bus and climbed in. He sat by a window on the right side while I found an aisle seat on the left, one row behind him. He seemed to know a couple of people on the bus, maybe fellow salesmen.

As the bus started off, a boy came around with a bucket balanced on his shoulder, mumbling inaudibly about something he was selling. Efraín waved him over and the boy pulled the cloth off the top of the bucket. It was warm corn on the cob. Efraín pulled one out and dropped some coins into the boy’s hand, holding up two fingers and gesturing.

     “For whom?” the boy said, looking around.

Efraín pointed towards me and smiled as I reached into the bucket to pull one out. I smiled back and nodded thanks. As the bus barreled on I munched thoughtfully on my corn. Both of us on our way back to our houses, both of us far from home.