



Cash, Credit, or Capivaris?


Locals exchange capivari bills, emblazoned with the face of a giant rodent. Diego Campos




"It brings customers through the door," said Roseanne Augusto, manager of a Silva Jardim hardware store, where a builder one recent afternoon set aside 2,700 reais in supplies, about $1,520 worth. He then left the store, went to trade reais, and returned to pay with capivaris, saving 5%.

Capivaris are managed by a new, community-run Capivari Bank. Inside its one office, a brightly painted space the size of a small fast-food joint, are the bank's employees, three women in their 20s.

For each of the 50,000 capivaris first circulated, Capivari Bank holds an equal number of reais on deposit at a traditional bank. Tatiana da Costa Pereira, the bank manager, says she sees as many as 60 clients a day. A local police car patrols outside and a state policeman comes in regularly.


Celma de Almeida, a garment saleswoman, says she didn't like the capivari at first. "I thought it was hideous," she says. "But it's grown on me. Now it's reais that seem ugly."

The first local money in Brazil was the palma, or palm, which helped foster a local economy in Conjunto Palmeiras, outside Fortaleza in Brazil's northeast.

The idea was hatched by Joaquim Melo, a former seminarian who worked as a social activist there in the 1990s. He saw a currency as a logical alternative to an experiment with neighborhood credit cards, which proved too bureaucratic for local merchants.

"They liked the idea of cash, even if it was a different sort of cash," says Mr. Melo. A group of four small retailers that accepted the palma quickly grew to more than 200.

At first, Brazilian authorities frowned on the idea.

In 1998, just as Banco Palmas was getting under way, police with machine guns raided its tiny office, acting on a complaint from Brazil's central bank. The palmas hadn't yet been printed, but police seized a handwritten ledger and 100 reais.

Mr. Melo convinced the government the notes weren't a threat to the real. Because the palma was pegged to the sovereign currency, he argued, it was as legitimate as a coupon or other proxy for legal tender.

The project drew interest from other poor communities. By 2005, the federal government came on board, getting Mr. Melo to help launch community banks across Brazil.

Silva Jardim's mayor, Marcello Zelão, wanted residents to spend in their own community. Because so many residents work in richer towns, he says local retailers often lost out to competitors at the other end of daily commutes. "It was like even our newsstands were inferior," he says. "Like the same newspapers had better news if bought in another town."

With Mr. Melo's help, the mayor organized town hall meetings and made the pitch. Locals voted on a name and hired a local designer to draw up the bills.

In November, with seed money from town coffers, capivaris rolled off the press—in denominations no greater than ten. "Big notes get hoarded," says Mr. Zelão. "Small bills circulate."

Locals use the capivari everywhere. Rogério Simplício Costa, priest at the town's hilltop Catholic church, says parishioners put about 30 capivaris in the collection box during a recent Sunday mass. Nelcimar Fonseca, manager of a supermarket, says as much as 12% of sales have been in capivaris. Margareth Vieira Xavier, owner of a roofing shop, pays part of her workers' salaries in capivaris.

"They didn't like it at first," she says, "but then they realized it saves money on groceries."

In Cidade de Deus, where the new local currency is called the CDD, people are just getting used to the idea. "I've seen a lot of money come and go," says Benta Neves do Nascimento, a 78-year-old resident who remembers failed currencies during Brazil's turbulent economic past.

Her qualm with the CDD has little to do with economics, though.

"I don't like the way it looks," she says. That's surprising: The likeness on the 5 CDD note is of her, a tribute to her longstanding role as a community activist and spirit healer. "If the money outlasts me, people will think I was ugly."

Write to Paulo Prada at