World Notes

Plagued by hyperinflation, Argentina and Brazil, South America's two largest economies, last week entered different forms of shock treatment to slow runaway wage and price increases. Brazil announced a hold on wage increases until July and an indefinite freeze on prices. Economy Minister Zelia Cardoso de Mello also disclosed plans to dismantle much of the country's elaborate system of indexation, which has been used since the 1960s to offset the effects of inflation. Among the system's inflation-fueling features scheduled to be phased out: so-called overnight bank accounts that pay interest to depositors by the day.

In Argentina, where a free fall in the value of the austral threatened to raise inflation astronomically, the central bank was forced to intervene. The appointment by President Carlos Saul Menem of a new Economy Minister, Domingo Cavallo, appeared to restore investor confidence. By week's end the austral had been stabilized -- at a value of roughly 36% less against the dollar than a week earlier -- and investment funds rose 40%. But inflation remains such an endemic problem for the economies of both Argentina and Brazil that the prospect of last week's actions leading to real progress remained doubtful at best.