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 The Brancatelli File

joe THE PAULISTA STYLE: LIVING,
WORKING AND SURVIVING IN SAO PAULO


BY JOE BRANCATELLI

February 1, 1986 -- Frequent flyers who find themselves in Sao Paulo these days can't help but revel in the city's startling turnaround. Once one of the world's most oppressively expensive cities, Sao Paulo is now a paradise beyond a business executive's wildest dreams.

A shoe shine at Congonhas airport costs only about forty cents. A good Brazilian beer at an elegant cocktail lounge costs about seventy-five cents. Even an elaborate banquet at one of the city's grand restaurants runs less than fifteen dollars a head, and a room at a five-star hotel here can be had for less than eighty dollars.

But what's glorious for visiting executives isn't quite so fabulous for the local business community. Brazil's much-chronicled financial woes are finally catching up to Sao Paulo. Even relatively prosperous local businessmen, who once thought themselves immune to Brazil's fiscal contretemps, are beginning to feel the pinch.

"The financial bind the country finds itself in is finally getting to be a big deal here. The situation is getting out of hand," says Roberto Cavalcanti, a Sao Paulo native who works for the Brazilian division of a large U.S. company. "Brazilians have always lived with 50 or 60 percent inflation. That was the normal way of life. But when the annual inflation rate is 200 percent ... that's crazy, even for Brazil."

Brazil's embattled economy isn't news to anyone who reads the business pages of a newspaper: there's the hyperinflation and the Third World's largest foreign debt; bank failures and strikes; the collapse of the cruzeiro, which was devalued seventy-one times in 1984 and declined in value by more than 65 percent last year. And then there's the unemployment rate. It may be 15 or 20 or 30 percent. No one knows for sure.

But what may be news to many Americans is the fact that Sao Paulo is coping. This gigantic, frenetic metropolis remains South America's commercial, industrial and financial capital. Sao Paulo isn't prospering, it isn't healthy, and, as Cavalcanti suggests, day- to-day life may be getting out of hand. But Sao Paulo is surviving. And that's just this side of miraculous considering the vagaries of Brazil's economic morass.

"Paulistas [residents of Sao Paulo] are the most extraordinary people in the world. They live to work hard. They strive. Very little frustrates them," says Artur de Abreu, the Portuguese-born director of Abreutur S.A., Brazil's leading travel agency. "Paulistas aren't Cariocas [residents of Rio de Janeiro], who live to play. Paulistas only want to work. And they do work, no matter how difficult the economy becomes."

Abreu's melodramatic assessment of the work ethic here isn't to be taken lightly. While much of South America's industrial complex erodes, Sao Paulo continues to produce. This 2400-square-mile city of 16 million is home to just 10 percent of Brazil's population, yet it contributes almost half of Brazil's tax base. Sao Paulo produces 65 percent of the country's industrial output. It's Brazil's cultural capital, the world's fifth largest car-building area, and the Brazilian money center.

Paulista business executives and the city itself manage to deal with Brazil's economic carnage by using a hotchpotch of tricks. Some survival tactics are purely stylistic.

A Paulista, for instance, will never admit life is difficult. Instead, he will crack a defensive joke about how bad things must be down in Buenos Aires, where inflation is more than 1,000 percent. "We're irreverent," explains a Brazilian airline executive. "It's a way of coping."

Paulistas have also accepted a sharply lowered standard of living. Per capita consumption of meat is down about 60 percent in recent years. Small, everyday things are affected, too. Good oranges and premium leather, for example, are hard to find these days in Sao Paulo. Brazil is a leading producer of both commodities, but the highest quality oranges and leathers are exported to service the foreign debt. Even coffee isn't what it used to be.

But mostly, Paulistas adjust to Brazil's hyperinflation by playing an incredibly convoluted series of numbers game. Since the cruzeiro is constantly being devalued, prices for goods and services are rarely stable for more than a few days at a time. Salaries, interest rates, savings accounts and anything else financial are equally unstable. The trick, Paulistas say, is to protect oneself against erosion at all times.

"It takes two years to adjust to the way the world works here," says Ricardo Tapia, a Panamanian who was recently general manager of the Sao Paulo Hilton International hotel. "You need two full years to catch on to the flow. Not to the mathematics, but to the mentality. Some Americans never adjust ...to triple-digit inflation and how it permeates day-to-day life."

Desmond Rowan, an Uruguayan-born marketing executive who works here, offers a sample of life with hyperinflation: "A Paulista never quotes a salary on a yearly basis [because] there's no such thing as a yearly rate here. A Paulista expresses salary on a monthly basis because salaries are frequently adjusted to reflect the decline of the cruzeiro."

This so-called "monetary adjustment" process is the backbone of life here. Just about everything is indexed to thirteen financial indicators and periodically adjusted upward to combat the erosion of the cruzeiro. Contracts are adjusted quarterly. Salaries are adjusted on a quarterly or semiannual basis. Banks pay a monthly monetary adjustment fee as well as interest on savings accounts. Credit card users are billed a monetary adjustment fee as well as finance charges. Even the cost of club memberships is adjusted with each monthly bill. The system is unwieldy, unfair and generally unworkable. It also creates an endless spiral of higher prices, devalued currency and rising salaries.

Given this internecine system, Paulistas use all kinds of ploys to protect their money. Some change their salary into dollars and buy only enough cruzeiros to get through the day. Others maintain multiple savings accounts, making sure that each account's interest is posted during a different week of the month. Many Paulistas play the overnight money markets with their spare cash. Any cash left over at the end of the day—even amounts as small as one hundred dollars—goes into a money market fund in search of a small, overnight profit. Credit cards, never a popular payment method here, are booming because the twenty-one-day "float" between the billing date and the payment date is a useful tool when the cruzeiro is being devalued by .4 percent daily.

"Everybody in Sao Paulo basically holds down two jobs," explains Sheila Hernandez, a Californian who works for a soft-drink firm here. "You have the job you're paid to do during business hours and then at night you go home to the job of managing your money so it doesn't disappear."

While Paulistas strive mightily, the realities of life in a creaky national economy cannot always be circumvented. No one knows that better than a wealthy, seventy-year-old Arab immigrant named Moufarrej.

Several years ago, during the last giddy burst of skyscraper building, the elegant Paulista district replaced downtown Sao Paulo as the city's preeminent business center. Hoping to cash in on the Paulista district's new cachet, Moufarrej's Brazilian conglomerate decided to erect a twenty-story office tower there. But Moufarrej didn't want to build just any place in the Paulista district. He wanted the best, so he chose to erect his building on the highest natural point in the city.

By the time Moufarrej's project was complete, however, the market for office space in Sao Paulo had collapsed. He was left with a luxurious, but empty, office building. Then Moufarrej had an idea: Why not turn the tower into the grandest five-star hotel in Sao Paulo?

Moufarrej tore up the inside of his twenty-story office tower and began rebuilding it for hotel use. As a tour of the construction site confirms, he spared no detail. Kitchen facilities have been built on every floor to ensure the prompt preparation and delivery of room-service orders. Each guest room is equipped with a computerized telephone that controls the television, stereo, and many billing functions. The telephone system even allows telexes to be sent through the television. Making use of the high ground, Moufarrej installed glass walls and a glass ceiling on the top floor of the tower. The result is a complex of restaurants and bars that offer spectacular wraparound views of Sao Paulo's unique urban sprawl.

But the reconstruction, christened the Moufarrej Park, is far from complete and months behind schedule. And when the hotel finally does open, Moufarrej will again find himself the victim of the Brazilian economy. Sao Paulo's hotel market is now at least as weak as the market for office space. "We're already overbuilt with quality hotels," explains Tapia, the former general manager of the local Hilton International. "We've got 2,000 five-star rooms right now and occupancy rates are very low. I don't think Moufarrej will be in any rush to open the hotel."

How much the secretive Moufarrej eventually will spend on the hotel project is anybody's guess. But his boondoggle in the Paulista district is far from the biggest white elephant in town. That dubious distinction goes to the publicly funded Sao Paulo/ Guarulhos International Airport.

Now open about a year, the airport remains only one-quarter complete and still lacks many basic passenger amenities. The runways are frequently closed because the sophisticated air-traffic control system needed to operate in Sao Paulo's smoggy, rainy climate hasn't been installed. There's very little ground transportation, even less infrastructure, and no hotel. It's more than six times over budget, yet needs another $150 million to complete construction work now in progress. And nobody knows how much it would cost to begin work on the other half of the airport.

"The airport's a monstrosity, a total fiasco," says one respected figure in Brazilian aviation. "There is nothing that can be done except to make it usable."

But making Guarulhos usable may take some doing. Its development always has had more to do with arcane political machinations, military jingoism and grandiose fantasy than the fact that the city needed a new international airport.

Despite Sao Paulo's importance to the business world, Rio de Janeiro traditionally has been the international gateway. The former major airport here, Congonhas, didn't even accommodate widebody jets. Business travelers always landed at Galeao airport in Rio, cleared Customs, then switched to smaller planes for the one-hour flight to Congonhas. Sao Paulo clearly needed better facilities, but Congonhas had no room to expand because it's ringed on all sides by skyscrapers. Local executives pushed the development of underused Viracopos airport in suburban Campinas. Viracopos was somewhat distant—sixty miles, and a ninety-minute drive, from downtown—but it was easily and cheaply expandable.

But the Brazilian government ignored Viracopos. The reasons were political and financial, not aeronautical. The local government in Rio adamantly opposed development of Viracopos. It feared Viracopos might co-opt Rio's Galeao airport and become Brazil's international gateway. That would cost the Rio government millions in landing fees.

After years of ferocious infighting the military junta ruling Brazil sided with Rio. Viracopos would never become Sao Paulo's international airport, the junta ruled. The military government also agreed that Rio would remain Brazil's international gateway no matter what solution would be found for the airport problem here.

The junta's solution for Sao Paulo was Guarulhos, located on the site of an isolated air force base about fifteen miles from downtown. According to plans formulated in 1973, Guarulhos would be built from the ground up as a joint project of the national and local government. For $100 million, or so a 1973 estimate predicted, Sao Paulo would get the biggest, best and most glorious international airport that could be built with borrowed funds. The plans called for Guarulhos to have three long runways and four exquisite Y-shaped passenger terminals. Equipped with the most advanced instrument landing systems, Guarulhos would be able to ignore Sao Paulo's bad weather and operate 98 percent of the time.

Twelve years later, on January 20, 1985, Guarulhos opened. The airport wasn't ready, but January 20 was the anniversary of the Brazilian Air Ministry. Besides, the military junta was abdicating to a democratically elected government two months later, so it was January 20 or never. To absolutely no one's surprise, the junta delivered very little on opening day. Only one terminal, two runways, the control tower and some administrative areas were operating. None were finished.

The tab for this quarter of an airport was staggering: about $600 million. What's worse, another $150 million is needed to finish the first terminal and complete construction work on the second. But no one knows who will supply the funds since both the local government and the year-old democratic national government are strapped for cash. Financing the other two terminals proposed in the original plans would seem to be impossible.

Operations at Guarulhos have been sporadic because so little of the airport has been completed and made fully operational. And international traffic to and from Sao Paulo still stops at Galeao because of the agreement that maintains Rio's position as Brazil's gateway city.

"Nothing about Sao Paulo is easy," suggests Abreu of Abreutur. "Even with our problems, this is a truly wonderful city in which to live. But nothing is ever easy."

This column originally appeared in Frequent Flyer magazine.

Copyright © 1983-2011 by Joe Brancatelli. All rights reserved.