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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: TokyoMex who wrote (8310)	9/18/1998 5:04:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Forget Inflation; Brazilians Now Worry About Deflation Dow Jones Newswires RIO DE JANEIRO (AP)--For years, Brazilians suffered under high inflation. Now, they're worried about deflation. Consumer prices in major cities fell 0.5% in August, following a 0.3% drop in July, the government-run Brazilian Institute of Geography and Statistics said. It was the first time prices had declined in consecutive months since the institute began measuring inflation in 1979. While lower prices may be a boon for consumers, they also reflect an economic slowdown that could lead to recession, the institute said. Eulina dos Santos, an analyst for the institute, said the deflation was a result of high interest rates that forced retailers to lower prices to attract customers. Clothing prices fell 4% in August, a seasonal decline caused by sales at the end of the Southern Hemisphere winter. But prices for food, housing and other items also went down. The problem is that continuous declining prices can reflect a strong retraction of the economy, with higher unemployment and little or no growth. "We can start thinking about getting worried," dos Santos told the newspaper O Estado de Sao Paulo. Last week, Brazil's Central Bank raised its key lending rate to nearly 50% a year in an effort to lure back investors who were taking money out of the country. The country has lost about $25 billion in reserves since August, as investors worry about the health of the Brazilian economy amid the turmoil that has hit Asian markets. Most analysts think Brazil's economy will grow 1% or less this year, and the outlook for 1999 is no better. Runaway inflation was a problem until 1994, when a new economic program called the Real Plan ended the constant price rises. Inflation that was running at 50% a month in mid-1994 now should be less than 4% for the entire year, the institute said.