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Government Wants to Teach Brazilians That if They Shop Till They Drop, Then Prices May Too : Economy: Inflation taught consumers to buy fast, before money lost value. Now they're being told to look for best deals.

August 15, 1994|RON HARRIS | TIMES STAFF WRITER

RIO DE JANEIRO — As Teresa Catramby, a 28-year-old assistant hotel manager, wound through the aisles of blenders, stereos, sofas, comforters and other merchandise at a downtown store, it never dawned on her that a lot of powerful people around Brazil, even the world, are paying close attention to such consumer excursions.

Politicians, business leaders, foreign investors and others want to know if a buyer like this mother of two will look at newspaper ads before leaving home, buy a toaster without checking the price next door or pay high interest rates to buy on credit.

Many, most notably Finance Minister Rubens Ricupero, are hoping that Catramby and her fellow consumers can quickly learn how to do something that is second nature to most Americans but that Brazilians haven't done for nearly 20 years: comparison shop.

Just last week, Ricupero spent 10 minutes in a nationally televised speech lecturing the nation's 155 million residents on the art of shopping. "Seek the lowest prices and the best-made goods," he said. He advised against making large purchases on credit.

Whether Brazilians can acquire this skill in the next few months is a key factor in whether the world's eighth-largest economy will be able to right itself, vanquish spiraling inflation and realize the economic promise that seemed assured 20 years ago.

Brazil is embarking on its sixth economic plan in eight years in its latest effort to conquer inflation, which has been running at more than 1,000% annually for years. Prices jumped 50% in June alone.

The country has changed its currency, exchanging the cruzeiro for the real, which is pegged to the U.S. dollar. The plan's success, economists say, is largely dependent on whether the government can cap a burgeoning deficit and keep a tight rein on the nation's money supply.

Also vital is whether Brazil can switch from an economy in which price-gouging merchants lead consumers around by their noses to one in which savvy shoppers force retailers to compete for their dollars and thus keep prices relatively stable.

"Yes, we have to change the attitude of government, but we also have to change the behavior of merchants," said Amaury de Souza, a sociologist and political consultant.

That's where Catramby comes in.

Over the years, as skyrocketing inflation caused prices to change monthly, weekly and even daily, the concept of comparison shopping was virtually eliminated from the Brazilian psyche. Consumers developed a "buy now" attitude, because prices were sure to go up, not down.

"When you have very high inflation, you must spend very fast because your wages will be devaluing very fast," said economist Helio Portocarrero, a university professor. "Shopping (for the best price) was simply too expensive."

Consequently, market analysts say, the corner merchant developed an almost monopolistic power over consumers that often bordered on extortion. "You'd go into a store and the salesman would say, 'You'd better buy it now because the price is going to go up tomorrow,' " said Paulo Levy, researcher for the government's Institute for Applied Economic Research. "He was probably lying, but you never knew. So you bought."

Merchants constantly hoisted prices, partly to adjust for inflation and partly because dizzied consumers could never get a sense of what products were really worth.

"I used to buy milk from a woman and I thought I was paying very little, because she sold it out of her home with no overhead," said Armando Castelar, assistant planning director for the state-owned Brazilian National Economic and Social Development Bank.

"Now, since the economy has stabilized, I realize that I was paying 25% more than the price at the market just downstairs. But I never realized that. If you asked me what the price of the milk was, I couldn't even tell you. Nobody knew the price of anything."

Prices routinely rose at the beginning of the month, when the vast majority of Brazilians get paid. Consumers rushed out and loaded up on whatever they could afford.

"You had no choice," Catramby said. "You would buy for the whole month and just store everything you could in the house. Everybody did it. If you didn't, your money would be worth less the next week."

Market equilibrium disappeared. Prices for the same product could double from one block to the next.

That was before the July 1 introduction of the real. Since then, inflation has been at a standstill.

The government has been trying to explain to Brazilians that they now have shopping options. Even before the plan went into effect, Ricupero had gone on television urging consumers to shop, shop, shop for the best prices.

And when merchants parked prices at penthouse levels just before the currency swap, Mariangela Sarrubbo, director of a federal watchdog agency, suggested that customers boycott those stores.

So far, consumer response to the new market conditions has been mixed. Customers are more price-conscious, merchants say.

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