Brazil: How to Do Business Amid Chaos

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Like the Amazonian rain forest or the skyline of São Paulo, inflation in Brazil never seems to stop growing. The cost of living last year rose 80.7% : auto prices increased 100% , drugs 78% and food 77% . Last week Brazil's prices began a new spiral that threatens to make last year's inflation appear mild.

President Joao Goulart has just signed a decree doubling the monthly minimum wage for urban Brazilian workers to 42,000 cruzeiros, which is $68 on the official exchange rate and about $30 in actual buying power. The workers are glad to get the cash they need to chase rising prices, but the new move adds just another episode to the nightmare that businessmen must endure to survive in Brazil. Says William Jones, general manager of Remington Rand in Brazil: "Every executive here should read Through the Looking Glass at least once each week—especially that part where Alice is told that she has to run fast just to keep in the same place."

Adjusting Prices. Business in Brazil has been turned into a dangerous and complicated gamble by runaway inflation, which has been accelerated by reckless government spending, constant labor demands for more money, and restrictive laws that force foreign companies to plow back their profits into the Brazilian economy. Between the time a businessman bids for an order and delivers the goods, he does not know how much the cost of the materials will rise, how high the workers' wages will climb, how much his financing charges will increase, or even if his customer will be able to pay for the order.

"When I came here four years ago," says William O. Kelleher, president of Sears, Roebuck in Brazil, "we were selling a 7-cu.-ft. refrigerator for 49,000 cruzeiros. Today that same refrigerator sells for 227,000." Coca-Cola raised its prices three times in 1963. General Electric writes a clause into its sales contracts that allows for adjustments in the delivery price to compensate for inflation, and IBM does the same in its computer-rental contracts.

Companies must grant credit to attract the free-wheeling Brazilian shopper, but extending credit has become costly for business. Customers understandably prefer to put off paying, because their wages are rising faster than prices; thus, as each inflationary month passes, the bills in effect become smaller. Among the slowest payers: the Brazilian government, which seldom honors its bills promptly; last week the U.S. and five other nations agreed to ease the burden of Brazil's $3 billion debt by stretching out payment schedules. Businessmen are finding it difficult even to keep on hand enough cash to carry on. Willys of Brazil complains that many of its auto dealers are losing more money through inflation than they are able to make on their auto sales.