Spiral Tears at Fabric of Clothing Firm : Inflation: Once you could get credit for 60 days. Now it’s cash and carry.

All their years of experience with inflation failed to prepare Davey Mayer and his son, Ricardo, for the hyper-inflationary misery that has engulfed them this year.

“We’re used to working with inflation, and our clients too, but the old tricks are no longer enough,” the younger Mayer told a visitor in the showroom of their women’s clothing fabric business in Buenos Aires’ garment district.

Mondor Textiles, founded in 1932 and one of the nation’s best-known fabric companies, has been pummeled by inflation of more than 8,000% in the last year, 110% in February alone. The economy shrank by 12% in 1989, and the number of jobless and “underemployed” has surged to about 25%.

The Mayers’ factory, which once worked three shifts a day, is down to half a shift. Sales slumped in January to 21% of the level of a year ago.

“We used to sell on credit, giving 60 days to pay,” the younger Mayer said. “Then we cut it to 30 days. Now it’s cash on delivery, or the dollar value for up to 10 days. We can’t even give credit too far ahead in dollars, because people won’t be able to pay.

“At first we raised prices twice a week. Then we gave up and set our prices in dollars. We stopped deliveries altogether for a while. The prices went up so fast that we didn’t know what the value would be in 30 days, when we delivered the order.”

The family had to close its Buenos Aires plant in 1978 because an artificially cheap dollar allowed imports to flood in. The Mayers now make fine acetates at a factory opened in 1986 in San Luis province, under a government program offering tax breaks for rural enterprises. Last July, with the first burst of hyper-inflation, the government suspended the tax breaks in an austerity program.

The company hopes that exports might provide a solution and is making overtures to foreign clothiers.

“But if your money has a certain value in dollars, and then three months later the value changes not by 2% but by 25%, how can you plan?” the elder Mayer said. “In the last year, the cost of living went up 115 times, but the dollar’s value went up 207 times. We’re used to gambling here, but we can’t even plan three months ahead.”

Like many Argentine businesses, the Mayers kept their capital in seven-day time deposits that paid sky-high interest. In January, the government in effect confiscated all such deposits to soak up the inflationary liquidity in the banking system and gave depositors 10-year dollar bonds instead. The bonds trade at about one-fourth of their face value. The Mayers had $80,000 of their savings in the time deposits over the New Year’s weekend when the seizure occurred.

“We now have bonds worth $20,000,” the elder Mayer said. “If we had bought dollars illegally like many people do, we would have been fine.”

His son added: “A lot of people had the brains to put their wealth outside the country. The only safe market here is the black market.”