NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, September 20, 2011

SILVA JARDIM, Brazil-After school and on weekends, Carlos Leandro Peixoto de Abril sells ice cream made by his grandmother from a stoop alongside the family’s cinder-block home.

Instead of Brazilian reais, though, the 11-year-old prefers payment in capivaris-a local currency emblazoned with the face of a giant rodent. Bills in hand, Carlos then heads to a local grocer and buys ingredients, at a special discount, for another batch of grandma’s goods.

The capivari circulates only in this dusty, agricultural town 60 miles north of Rio de Janeiro. The money is an effort by the town, one of the poorest in southeastern Brazil, to encourage its 23,000 residents to spend locally.

Cash, Credit, or Capivaris?

The capivari is one of 63 local moneys now circulating in needy towns and neighborhoods throughout Brazil.

Ten months after introduction of the capivari-named after the capybara, a pig-sized rodent common in a local river-the currency is lifting fortunes of local retailers and gnawing holes in the pockets of consumers. Capivaris pay for everything from haircuts to restaurant tabs to tithing at churches. The mayor even has plans to open a “Capivari Megastore,” where local artisans and growers can showcase wares.

The capivari is one of 63 local moneys-including bills named after the sun, cactus and the Brazil nut-now circulating in needy neighborhoods throughout Latin America’s biggest economy. The idea is gaining currency as towns seek a share of current economic growth. This month, a new local currency hit the streets in Cidade de Deus, the Rio slum that was the subject of a blockbuster film and a stop on President Barack Obama’s South American tour this year.

While equal in value to the real, local currencies gain traction because local merchants offer discounts when using them. No one is forced to quit the real, but shopkeepers say greater volumes make the markdown worthwhile.