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.
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.
“People are more careful with their money,” said Carlos Roberto, manager of a medium-sized department store downtown. “They are looking for sales. They are looking for deals.”
“Now people are going from store to store,” said Peixoto Sousa, a linen and bedding salesman at another store. “If they don’t like our prices, they go to another store.”
That has caused some merchants to become more competitive.
“We’ve been spending a lot of time comparing our prices to those of other stores,” said Ramone Neto, owner of a large fabric store that sells to both consumers and retailers. “We’ve been lowering prices to see if it will get more customers in the store.”
Jorge Cosenedey, co-owner of a notions store, hasn’t lowered his prices, but he is making other concessions.
“See this bag,” he said, pointing to hundreds of sewing pins bunched inside clear plastic wrapping. “They sell for one real each. If you buy 10, I’ll sell them to you for eight reals. I didn’t do that before.”
Nationally, prices have edged down about 1.5%, according to government reports, and many stores are offering discounts of up to 30%. The cost of basic foods has fallen 5.7% and would have declined more if two frosts in late June and early July hadn’t damaged fruit and vegetable crops, government officials said. Overall, however, prices are still inflated and will fall further if Brazilians shop wisely, Ricupero said last week.
The biggest transition for Brazilians, say economists and sociologists, will be learning to develop a long-term view of their buying power, holding on to their money until they find the right price.
That concept hasn’t completely sunk in.
Jose Valentem, 62, was browsing among stereo systems at one store. He had been to five others already but had not considered delaying his purchase.
“It’s the way I’ve always done it,” he said.
Maria Ester, 20, a student, was looking at athletic shoes.
“No, I really haven’t changed the way I shop,” she said. “I just buy it when I need it and try to get the best price that day.”
Merchants are taking advantage of such attitudes by keeping prices high on big-ticket items such as appliances, electronics and furniture but offering extended payment plans--with exorbitant interest rates. Their customers are actually paying more for the products now than they did before the new economic plan went into effect.
Under the 12-month payment plan, the cost of a blender goes from $34 to $90, a $400 stereo to $1,200. Yet people are loading up .
“The client likes knowing that their payment will be the same every month,” appliance salesman Evesio Silveira said. “In the old days, you never knew what it would be because you had to factor in inflation, which changed from month to month. So even though (the price is now) higher, people are buying.”
Unfortunately, says economist Portocarrero, many customers assume that because the payments are stable, they are getting a good deal.
“Not everybody is very conscious about financial mathematics,” he said, “but I think people will learn over time.”
Some of the rush, Levy said, is the result of a pent-up demand for credit in any form.
“Under high inflation, you’d buy things even if you didn’t need them just to get rid of the money,” Levy said. “Clothes, groceries, small items. Many things you needed, you couldn’t afford them. Now that you have this alternative, buying them in 10 or 12 installments, you can budget around that.”
Catramby thinks people will catch on. She did.
Catramby lived briefly in the United States before returning to Brazil six months ago. In her first two months in the United States, she said, she bought just as she had in Brazil, rushing out with each paycheck to load up on groceries.
“But then I saw that’s not the way you do it,” she said. “You wait for sales. You use coupons. You go and buy what you need, but you hold back some money and then you come back the next week when the prices are maybe better. It just takes time to adjust.”
A Price Comparison
The median individual income in Brazil is $266.50 a month, compared to $1,650 for the United States. Figures below are in U.S. dollars.
U.S. Brazil Soap $1.15 $.024 Quart of milk 0.69 0.89 Dozen eggs 0.99 0.82 Cheese pizza 5.50 11.00 Can of Coke 0.50 0.33 2 lbs. sugar 1.38 0.68 Plain T-shirt 1.70 9.00 CD player 120.00 261.00 20-inch Sony TV 300.00 512.00 Ford Escort 9,000.00 19,000.00
Sources: Brazilian newsmagazine Istoe, Times staff
