Author: Micheline Batista

Source: Diário de Pernambuco Online - 22/07/2010

Underground economy involves legal activities, such as informal work

Photo: Cecília de Sá Pereira / Aqui PE / DA Press - 14/8/08

The Brazilian underground economy reached R $ 578 billion in 2009. The figure corresponds to 18,4% of the country's Gross Domestic Product (GDP) and is close to the GDP of a country like Argentina. The data comes from a survey released yesterday by the Institute of Economics of the Getúlio Vargas Foundation (Ibre / FGV), developed in partnership with the Brazilian Institute of Ethics in Competition (ETCO). From now on, the new Underground Economy Index will be released every six months.

The underground economy involves both legal activities, such as informal work and the exchange of goods and services between neighbors, and illegal ones, such as the sale of stolen drugs and products, prostitution, gambling, smuggling and fraud. It is all the production of goods and services that, deliberately, does not report to governments.

“There is an Argentina hidden inside Brazil. Measuring this economy can give us an idea of ​​what governments fail to collect. They collect more and more from those who pay because they are unable to collect from these underground activities ”, observes Fernando de Holanda Filho, a researcher at Ibre / FGV.

This subtracted share, which today is 18,4%, was already higher. The underground economy came to bite 21,0% of the Brazilian GDP in 2003, when the series of index estimates started. In six years, GDP grew from R $ 1,7 billion to R $ 3,14 billion. “This drop can be attributed to a faster growth rate of the economy, because companies also grow and cannot stay out of the eye of the State. And also to a greater offer of credit, because to acquire it, it is necessary to be formalized ”, interprets the researcher. According to him, the trend is that it will continue to fall if the Brazilian economy continues to grow at the current pace.

The new index is considered a natural evolution of the previous one. What has changed since the beginning of the series here is the methodology. It was perfected, which made it possible, for the first time, to estimate the amount handled by the underground economy (R $ 578 billion). “Despite being an estimate, the new index is much more accurate. And it will be corrected whenever IBGE (Brazilian Institute of Geography and Statistics) corrects Brazil's GDP ”, he explains.

To estimate the size of the underground economy, Ibre / FGV and ETCO used the monetary method and data from informal labor. In the monetary method, a currency demand equation is estimated, that is, how much currency the Monetary Authority must offer to satisfy the demand in a given period, and how much tax is collected. Data on the informal market, on the other hand, were taken from the National Survey by Sample of Households (Pnad), from IBGE, relating the percentage of informal workers to the labor income generated by this segment.

Debate - The next Underground Economy Index, for June 2010, should be released in November or December this year. It is intended, with this, to draw the attention of public opinion and stimulate the debate about the consequences that the subtraction of figures of this magnitude, which run under the hood, shall we say, can bring to the country. It is an economy that precarizes working conditions and brings some sectors linked to organized crime, with direct losses for the whole society.