Should of had Gold instead of all that Real money.
I suppose this will not affect the poor because they already had nothing!
Brazil's Affluent Hit by Crisis
By Anthony Faiola
Washington Post Foreign Service
Monday, January 25, 1999; Page A15
RIO DE JANEIRO, Jan. 24 – "Bye, bye car – this is probably going to
be repossessed next month," said Arlinda Lima, 26, leaning against her
gray Volkswagen, barefoot in black sunglasses and a scarlet bikini near
Rio's 101-degree Ipanema beach.
"What would you do if your [car] payments suddenly went up a third in
one month?" said the Rio graphic designer, talking about the personal
effect of the two-week-old devaluation of the local currency, the real, now
taking its toll on Brazilians.
Like many in the middle class, Lima financed her two-year-old car with a
loan fixed to the U.S. dollar – meaning that her monthly payments have
soared as the real's value has dived since Brazil's currency crisis began
Jan. 12.
"I could stay home and cry about it – but then again, it's hot, sunny, and
there's the beach," she said. "I'll cry tomorrow."
Making the best of things is part of the Brazilian soul. But without a doubt,
the uncanny ability of the people in Latin America's largest nation to find
the silver lining will be tested as economic clouds have gathered over the
home of Carnival.
Since the administration of President Fernando Henrique Cardoso
devalued the real, the local currency has fallen by more than 40 percent.
The Clinton administration, the International Monetary Fund and foreign
investors, who fear that currency woes in the world's eighth-largest
economy are reigniting the global economic crisis, have become
increasingly concerned about the situation here.
But it is the 165 million Brazilians who are feeling the sting most. The
Brazilians, who have lived through periods of hyperinflation so bad that the
value of a worker's paycheck would lose half its value before it was
cashed, have a disturbing feeling of deja vu.
To date, however, it is mostly entrepreneurs, and the middle and upper
classes that have been affected because the prices of dollar-related goods
that shot up immediately – such as cars and imported products from hair
gel to fruit jam – are not products within the reach of Brazil's vast numbers
of poor.
Yet, in the coming weeks, experts predict, the prices of some everyday
products will begin to rise. It is not inflation, but rather, a "price
adjustment" related to the higher production costs of companies that must
import raw materials in dollars but sell their goods in reals. Much of the
wheat in Brazil, for example, is imported – thus the cost of bread is likely
to increase soon, economic analysts say.
"We're going back. We've always moved a little ahead, and then we
always seem to go back. I've been around here long enough to know,"
said Waldemar Costa de Souza, 70, a retired laborer who lives on a
monthly pension of $75.
"At my age, I've seen too much disappointment to have hope," he said,
while walking out of a Copacabana grocery carrying cooking oil and rice.
Yet, on the inflation front, Brazilians have a strange ally – recession. As
Brazil sinks deeper into an economic decline that many experts say may
mean a 3 to 5 percent contraction of the economy this year, the demand
for many goods has dried up, making it much more difficult for merchants
to raise prices substantially.
But that hasn't stopped many companies from testing the waters early with
price increases.
Ford and General Motors, for instance, have raised the price of their cars
by as much as 9 percent in Brazil, sparking public and government anger.
Compounding those feelings was Ford's decision to close a manufacturing
plant in San Bernardo do Campos this month, laying off 2,800 workers.
The workers have refused to leave, and are staging a sit-in.
Communications Minister Joao Pimenta da Veiga blasted both U.S.
automakers: "This is absurd," he said. "The government is trying hard to
create balance in the economy and a business takes advantage of this
opportunity to make profits on the side."
GM spokesman Bob Sharp said the company has tried to limit its price
increases in the wake of criticism, but that increases remain necessary.
"We're paying dollars to import our parts from the United States, yet
we're receiving [devalued reals] back from our customers," he said. "We
had no choice."
In Brazil, far more important than car price increases, however, is the fact
that some pharmaceuticals are edging higher.
In the woody neighborhood of Laranjeiras in the shadow of Rio's famous
Christ on Mount Corcovado, Sergio de Oliveira, 52, owner of the
Glicerio Pharmacy, said that prices for a bottle of a local anti-flu
medication made with imported ascorbic acid rose from $8.46 to $9.
"We're trying to absorb some of the cost, but let's face it, if our costs go
higher, the customer ends up paying," he said.
Hit even harder are companies and individuals who use dollars in business
or in their everyday lives. It has led to serious examination of Cardoso's
"real plan." Launched five years ago, the plan, which pegged the real
loosely to the dollar to stabilize the economy, succeeded in ending
inflation, generating economic growth and laying the framework for
opening the economy.
The debate over whether it was worth it is heating up.
For Antonio Octavio Cintra, a Brasilia-based congressional researcher,
the devaluation means uncertainty about how he's going to pay his
daughter's tuition at the Corcoran art school in Washington. "I've been
buying, and then wiring, dollars to Washington for months, but I don't
know how I'm going to manage now," he said.
"I can't say that I blame Fernando Henrique [Cardoso]," Cintra said. "I
am perhaps rare, because many people are questioning whether or not this
was worth it. But I still believe that our sacrifices today are going to result
in a better future."
Sergio Neves, 25, a burly, tattooed Rio resident who owns the Boneyard
CD Store in Copacabana beach, doesn't agree.
"It's this simple: I lost $2,000 on my last order because I bought in dollars
but sold in reals," Neves said. "If you just up your prices, nobody's going
to buy anything, so I'm stuck. I'm seriously thinking about closing next
month."
For wealthy Brazilians, the crisis hit in the worse possible month: January
is the peak travel season for South Americans. The United States is the
most popular overseas destination for Brazilians, and those now returning
from trips have to pay 40 percent more for charges made on their local
credit cards. "I don't want to look at that bill – ever," said Simone Albano,
41, returning from a trip to New York.
© Copyright 1999 The Washinton Post Company
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