By Mary Milliken

SAO PAULO, Brazil, Aug 13 (Reuters) - When it comes to buying toilet paper, Brazilians are finding their money just doesn't go as far as it used to.

Toilet paper makers are trimming the length of their rolls while Brazil is battling a two-ply crisis rooted in the economic chaos in neighboring Argentina and a local energy shortage.

Dollar-denominated pulp costs are up because Brazil's currency, the real <BRBY>, is down at record lows - a contagion effect from the Argentine economy. And production costs are rising because electricity rationing requires the use of generators and changes in the manufacturing process.

A company could compensate for higher costs by raising prices for consumers or by sizing down packages.

The toilet paper companies took the latter approach, prompting consumer watchdogs to blow the whistle.

"They want to increase prices without the consumers noticing," said Vera Marta Junqueira, director of surveys at consumer protection agency Procon in Sao Paulo. "It is a type of trickery."

In its monthly supermarket surveys for basic necessities, Procon found that leading brands like Neve and Personal cut the the length of rolls by 25 percent from 40 meters (44 yards) to 30 meters (33 yards), but not the prices.

TRUNCATED TOILET PAPER CAPER

"Now the government not only wants us to live in the dark, but also to ration the use of said item," columnist Barbara Gancia joked in the newspaper Folha de S.Paulo.

Procon says it has alerted the government's economic authorities to the truncated toilet paper and similar strategies by manufacturers of laundry detergents and cookies.

"In many of these products, the reduction in size did not produce a proportional cut in prices, which prompted an immediate price hike of up to 25 percent in our survey," Procon warned consumers last week.

Klabin Kimberly, the Brazil-U.S. joint venture of top local paper group Klabin <KLAB4.SA> and Kimberly-Clark Co <KMB.N>, as well as the maker of market leader Neve, was discussing the change at length in meetings Monday but had yet to comment on the matter.

At a Carrefour supermarket in Sao Paulo over the weekend, shoppers in the toilet paper section were zeroing in on the roll length for the first time in their lives.

"I'm going to buy Fofura, because it is still 40 meters long and the same price as Neve," said Marcia Junqueira. "But Neve does have the quality I like." Shoppers Iris Ungerer and Sueli Santiloni said they have seen companies take this tack before in times of economic upheaval.

When the economic stability plan, the Real Plan, was conceived in 1994 to tame inflation, they noticed that the quality of cheese plummeted while prices remained the same. Quality eventually recovered and prices went up.

Brazil's economy was set to grow by 4 percent this year before the real lost a fifth of its value, sparking inflation concerns and interest rate hikes. Then in June came the government order to cut electricity consumption by 20 percent.

Latin America's largest economy is now likely to grow 2.5 percent in 2001 and there may even be economic contraction in some quarters.

"The companies just don't want to earn less," said Santiloni. "It's a dirty trick."