Where Carrots Cost Twice as Much as Chicken
In Brazil, despite low inflation, some prices defy logic. People's budgets are being stretched.
RIO DE JANEIRO
MARILIA LUIZA DA SILVA, a maid, recently stopped paying health insurance after her monthly premium doubled from $100 to $200.
Mrs. Da Silva and her husband, Jorge, who washes tourists' clothes for a hotel, earn a combined monthly income of $437, making them part of Brazil's lower-middle class. They live in a two-bedroom shack with their three small children in the Rio hillside slum of Parque da Cidade, near the beach of Ipanema.
Da Silva thought their living conditions would improve when the government switched currencies last July and slashed galloping inflation from 50 percent a month to less than 2 percent. Instead, she says now, ''I can't buy much of anything.''
While there have been definite benefits from low inflation -- prices have stabilized for many goods -- Brazilians are finding their budgets stretched in new ways. While basic products like rice and beans remain affordable, prices for most goods and services taken for granted in the United States have skyrocketed.
Since last July, rent for a two-bedroom apartment in the middle-class Rio neighborhood of Botafogo has increased from $200 a month to $1,100. Some private schools have raised monthly rates from $223 to $380. First-run weekend movie prices have at least doubled, and restaurant throughout the country have increased prices by 42 percent. In Sao Paulo, the Movement Against Abusive Prices receives up to 10,000 calls a week.
And some prices defy logic.
For about $18, consumers can purchase one pound of filet of sole.
Two pounds of carrots cost the same as four pounds of chicken. A toy coffee machine sells for more than a real one, and imported eyeglass frames cost the same as a domestic 29-inch television and video player combined.
Such price increases do not show up on inflation surveys, which only consider basic foodstuffs and household products, such as soap and toothpaste, while ignoring nonessential items, such as paper towels.
Brazil's inflation indices also give less weight to doctor visits and rents and recognize goods sold only at official prices -- those at or below inflation. Many companies break the law here by raising prices above the rate of inflation.
Price hikes, however, have not kept many Brazilians from indulging beyond their means.
Telecheque, a credit watchdog firm, registered a 191 percent increase in bounced checks between last June and February. Visa reports that customers who have to wait 90 days to pay off their debts have doubled. And banks have tightened up on granting loans to individuals.
Despite mounting debt, many Brazilians who could not afford checking accounts before feel they are better off now.
For the first time in years, low inflation has allowed them to buy goods on installment plans, pay with credit cards, and even order US products by mail-order catalog. Some 700,000 tourists took advantage of the strong new currency -- which is overvalued by as much as 40 percent -- to purchase dollars and visit the US.
Maria das Gracas, another Rio maid who earns $215 a month, describes her life as ''a little bit better.'' She finds it comforting to pay the same monthly sum for basic necessities such as utilities and bus fare.
As finance minister, Fernando Henrique Cardoso last year authored the Real Plan, named after Brazil's new currency, the Real. Grateful for lower inflation, voters gave Mr. Cardoso a landslide victory in last October's presidential election.
But from the outset, the government had problems with many merchants and landlords, who exploited widespread confusion during the currency switch and doubled, even tripled costs.
Luis Roberto Cunha, economics professor at Rio's Catholic University, blames Brazilian society's ''ingrained culture of inflation.'' Merchants are so used to living with hyperinflation that they assume economic stability cannot last, ''so they raise prices.'' he says.
Alvaro Zini, professor of international economics at the University of Sao Paulo, says higher prices for certain goods and services are due to an ''overheated economy,'' whereby lower inflation allows consumers to spend more and merchants to raise prices due to the high demand.
''Unless we cool the economy down, we will have a recession,'' he says. ''We are reaching the ceiling, the end of the consumer party.''
For many middle-class Brazilians, the party appears to be over. Since wages are no longer indexed to match the cost of living, unions are striking for higher salaries.
In Sao Paulo, some 9,000 General Motors workers recently walked off their jobs demanding a 47 percent increase in pay, joining education and health workers on the picket lines.
Even though Sao Paulo is the nation's richest state, wages there mirror salaries earned in the rest of the country. About 54 percent of the population earns less than $130 per month, according to a recent editorial in the Rio daily, Jornal do Brasil. A Sao Paulo state doctor, for example, earns a monthly income of $410, while school teachers make only $160.
Inflation is slowly rising. According to the Institute for Economic Research, inflation rose 1.61 percent in 30 days ending March 8 and is projected to reach 3 percent a month by June 1.
Perhaps with that in mind, the government recently agreed to raise the minimum wage in May from $79 a month to $113, which would mean an extra $17 for the da Silva family.
''That won't help us a bit,'' laments da Silva. ''The way prices are going up, life will be the same.''