COLUMN ONE : Coping as Costs Soar Into Chaos : Brazilians and Argentines hoard food and buy dollars to deal with inflation of more than 70% a month. The crippling spiral could threaten South America’s two largest democracies.

At 8:30 on a Saturday morning, hundreds of shoppers are poised at the doors of Paes Mendonca Hipermercado, a giant Brazilian supermarket known for its competitive prices. When the doors swing open, Elias Alves de Oliveira is one of the first to rush inside.

He maneuvers two shopping carts to a massive stack of bagged rice. His wife and his sister quickly load one cart with 22 pounds of the grain. Moving up the aisle, they pile on 44 pounds of sugar.

Oliveira, 34, is “stocking”--investing in large quantities of food staples and household provisions as a defense against double-digit increases each week in the cost of living. Stocking is one of the many ways that people in Brazil and Argentina use to try to cope with inflation of a magnitude that few countries have ever seen--more than 70% a month.

Adjusting to such monetary madness is an everyday drama for the 180 million people in South America’s two biggest countries as they struggle against personal impoverishment, business failure and national collapse.

Some political analysts see hyper-inflation as a threat to social order and democracy itself in Argentina and Brazil. Last year, as Argentine prices spiraled toward a record monthly rate of 196% in July, popular discontent erupted in looting at thousands of food stores, leaving 15 people dead.

With hyper-inflation, money in the pocket is like water on sand. Even seemingly astronomical interest rates paid on savings accounts--up to 28% a day in Argentina in late February--often do not keep up with inflation. And as buying power evaporates, people have less and less to save.

Oliveira, a microfilm technician, said he stopped making deposits in his savings account several months ago and started stocking groceries in the certainty that their value will increase.

“If you are able to build up a stock at home for your family, it is a better deal than a savings account,” he said, heaping packages of sugar in the shopping carts before moving on to the beans.

An hour after opening, the cavernous supermarket was clogged with shoppers, many of them stocking soap, detergent, cooking oil, sugar, coffee, beans, rice, soft drinks, canned goods and many other items.

While Brazil’s “stockers” gamely try to harness runaway grocery prices, consumers in Argentina increasingly react with anger. Adrian Rodriguez Boero, operations manager for Argentina’s 60-store Disco supermarket chain, insisted in an interview that supermarkets are not price-setters, that they merely pass on increases from wholesalers.

Nevertheless, “we are the place where the public encounters it,” Rodriguez Boero said. “The people complain constantly about the prices. There are always tensions at the tills.”

His operations problems have multiplied. The credit terms of wholesalers “have been tightened savagely,” he said. “Suppliers demand payment in cash, or within 48 hours at best, instead of 30 days. This requires a lot of working capital, and it must be killing many smaller markets.”

And merely changing the prices each day chews up many employee hours. Disco and other big chains have introduced bar-coding and electronic price detectors, but smaller stores must re-mark each item repeatedly.

Although long accustomed to varying rates of rapid inflation, Brazil had never before experienced the dizzying velocity of the current surge. For Argentines, however, the feeling is sickeningly familiar after last year’s ravages.

“In the last outbreak, people ran to buy anything,” Rodriguez Boero said. “It was a compulsive wave of purchases to unload their australs (Argentina’s currency) before they lost value. This time, the prices are racing ahead just as fast. So people are running to buy dollars instead, and they are holding on to the dollars to see if they will buy more a bit later.”

Carlos Salas, a Disco store branch manager, said he has joined the rush for dollars.

“Poor or rich, we are all financiers, trying to get through to the end of the month. When I get paid, I use as many australs as I need for rent and other expenses, and then use the rest to buy dollars. Many prices are even set now in dollars. But I don’t earn dollars.”

Rosa Juarez, a 66-year-old retiree, was changing dollars with an arbolito , literally “small tree” but slang in Argentina for unauthorized money changers who stand like trees on Calle San Martin, Buenos Aires’ Wall Street. She and her husband get about $70 in monthly pension payments.

“At the start of the month we pay our light and gas bills and buy dollars with the rest,” Juarez said. “Then every day we come to change money here, and that’s how we live. If not, you lose everything.”

Alfredo Piano, co-owner of one of Argentina’s largest currency-exchange companies, said that people are bringing whatever australs they can muster, often worth as little as $20 or $30, and lining up to buy “greens,” as dollars are known.

Sometimes workers pool their resources to buy a few dollars and share the profit. In fact, the dollar market may be Argentina’s only growth industry.

“It’s an infernal job for us,” Piano said. “We have 2,000 customers per day, double the number a year ago.”

Unlike Brazil and most other Latin American countries, where disparities between the few rich and the many poor are immense, Argentina has always had a large middle class. But the hyper-inflation is widening the gap between Argentines with access to dollars and those without--a potentially dangerous trend in a country with a history of military coups in response to economic turmoil.

Many middle-class Argentines have stashed dollars under the mattress or opened bank accounts illegally in Uruguay or Miami. Now some are cashing in those dollars to weather the inflation.

“The only reason that a middle class still exists in Argentina,” Piano said, “is that people began acquiring dollars years ago.”

Fabio, a dealer on Rio de Janeiro’s illegal but widely tolerated black market in dollars, said that U.S. currency also is a good hedge against inflation in Brazil. Fabio and other black marketeers even give many customers the added service of telexing deposits of newly purchased dollars to money-market accounts in the United States.

But only better-off Brazilians have extra cash these days for investing in U.S. currency, Fabio said.

“Today, from the lower middle class down they aren’t in a situation to invest in anything,” he said. “They really don’t have money.”

Jamim Merence, a Rio de Janeiro handyman, said he must buy paint, cement and other materials on the same day he submits an estimate for a job--or run the risk of budget-breaking price increases.

He collects half of the payment for a job before he starts and the other half when he finishes, but inflation can erode his profits before he receives the second payment if the job takes two or three weeks, as the painting of a three-bedroom apartment recently did.

“When I took the job, the price I quoted seemed very good,” Merence said. “When I finished 20 days later, I took a big loss.”

More inflation-savvy businessmen avoid such losses. In Argentina, down payments are made at current austral prices, and later payments are usually actualized to reflect the austral’s deterioration against the dollar. In Brazil, virtually all values in the formal economy are “indexed,” readjusted periodically to keep pace with cost-of-living indexes.

Rio dentist Ronald Penido makes all work estimates in BTNs, or National Treasury Bonds, rather than in cruzados, the official currency. After making one estimate in February, he reminded a patient before beginning work in March, “Of course the BTN value in cruzados has changed.” It had jumped from 17.1 cruzados in February to 29.5 cruzados in March.

The BTN is widely used for indexing rents, time payments, insurance premiums and other values.

Many Brazilian stores mark consumer goods with letter and number codes to represent constant values rather than trying to keep up with changing price tags. In bookstores, many price tags are in the real livro, a quasi-monetary unit adopted by about 25 Brazilian publishers.

Every week, the publishers’ association sends out a notice giving the real livro’s value in cruzados. Other publishers do the same with their own units or codes. As a result, bookstore browsers must ask a clerk for the price of each book, and clerks must make conversions on calculators.

“When three customers are here at once, you might have to wait a while for a price,” said Ernani da Silva, a salesman in a bookstore in Rio’s Leblon neighborhood.

Deposits in Brazilian savings accounts are indexed monthly, and short-term deposits in the “overnight” money market are readjusted each day. Many middle-class Brazilians keep their money in the “overnight,” transferring cash to their checking accounts only when checks must be covered. At the beginning of the month, when many bills are due, banks’ telephones are swamped with calls requesting fund transfers.

“Sometimes it takes half an hour to get through to the bank,” said Salomao Quadros da Silva, a university professor.

Brazilian wages are increased every month by the same percentage as the official cost of living index. But raises lag behind the index, and salaries cannot keep up with quickly climbing inflation. Unions are constantly demanding special raises to make up for losses in real wages, often calling strikes to back the demands.

Almost no one can truly keep up, and life styles are changing in both Brazil and Argentina. The number of tourists in Argentina’s Mar del Plata seaside resort fell 30% in February, and those who came spent a fraction of what they spent in the past.

One Argentine hardship joke has a doctor asking his patient why he took only one of his prescribed pills per day. The patient answers, “But doctor, you told me to take one after each meal.”

Middle-class Brazilians used to beat inflation by making purchases with credit cards. When credit card bills came due up to a month after the purchase, the cost to the consumer was reduced in effect by the amount of monthly inflation.

“No one paid cash,” said Alexandre Moura, a salesman at the Bill Brothers clothing store in the Rio Sul shopping center. But in recent months, Brazilian stores have raised prices for credit-card purchases by as much as--or more than--a month’s inflation.

At Bill Brothers, for example, prices to customers who pay with credit cards are exactly double the prices for those who pay with cash or check. Now, credit-card purchases are “very, very rare,” Moura said. Most restaurants no longer accept credit cards.

At the Freeway supermarket in Rio’s middle-class suburb of Barra de Tijuca, almost all customers still use credit cards to pay for groceries. Angelo Maldonado Dias, waiting at the checkout counter with his two small daughters, acknowledged there is no longer any advantage because Freeway prices are 90% to 100% higher than those of nearby supermarkets. But he added, “The problem is, we are short on cash, so we have to use the card.”

Dias, 33, said his salary as a computer programmer has been so eroded by inflation that he no longer has money to take his family to a restaurant or on a weekend excursion.

“There isn’t enough to buy clothes for the children,” he said. “There isn’t enough for any entertainment, none. Our entertainment is going to the supermarket.”

The money problems can cause marital problems, he added: “Relations between husband and wife are shaky, tense. You want to buy something, but there isn’t any money.”

Still, some imaginative South Americans have found techniques to use inflation to their advantage.

Aldo Listre, 35, the owner of a shop selling used books and magazines in the Argentine mountain resort town of Carlos Paz, put up a sign in his window saying, “I accept dollars.” Vacationers were bringing dollars to maintain their buying power and changing the dollars locally.

“I figure if they have small bills left over, they can come here and buy a book,” he said.

And Hector Toani, who runs a family car-battery factory in Carlos Paz, said: “We are calculating prices directly in dollars. If we don’t, it’s impossible to make any calculations. We accept dollars or the equivalent in australs. If prices are rising every day, to put them in dollars is the only way to cover oneself. Nevertheless, we are selling much less than before--70% to 80% less.”

In the working-class suburbs on the outskirts of Buenos Aires, there are neither dollars nor jobs these days. It was in these barrios where the rioting occurred last year. Common crime is also increasing.

In Tres de Febrero, Salvador Zeoli sells cigarettes and candy at a kiosk he built onto the front of his house, facing a ragged neighborhood square. He pointed across the street to a house cleaned out by armed robbers the previous week and described another robbery around the corner the day before. He blamed the general economic breakdown.

An Italian immigrant who came to Argentina 40 years ago, Zeoli said he was proud to have driven his own car for the last 22 years. Six months ago, he put it in the garage. He simply could not afford the hyper-inflated gasoline prices. Zeoli and his wife get around by bicycle, although, he conceded, “bicycle parts have also shot up lately.”

He is the only kiosk owner in the neighborhood who still sells cigarettes, a product that has been especially hard hit by inflation.

“First my suppliers raised the price of cigarettes 50%, then 6%, then another 77%, all in less than three weeks,” Zeoli said. “That meant I had to sell three packs just to be able to buy one new pack for the shelves.”

A customer and friend of Zeoli shuffled to the kiosk’s barred window and bought a single cigarette. He was a plumber and unemployed, Zeoli said.

“We never used to sell one cigarette at a time like that,” he said. “Maybe it’s better that the people aren’t poisoning themselves with smoking, but they are poisoning themselves with the tensions these days of just trying to survive.”

INFLATION RAVAGES BRAZIL, ARGENTINA Accumulated inflation during the last 12 months was 2,751% in Brazil and more than 12,000% in Argentina. Here are the monthly rates:

1989 Brazil Argentina March, 1989 6.1% 17.0% April 7.3 33.4 May 9.9 78.5 June 24.8 114.5 July 28.8 196.6 August 29.3 37.9 September 35.9 9.4 October 37.6 5.6 November 41.4 6.5 December 53.5 40.1 1990 January 56.1 79.2 February 72.8 70*

*Estimated