General scolding: Brazil underground
Author: Claudio Humberto
Source: Claudio Humberto's Blog, 21/04/2008
The finding that the so-called underground economy, which involves activities that manage to circumvent official control, grew in 2007 above the official Gross Domestic Product (GDP) draws attention to the reasons that lead to this deformation. A survey carried out by the Brazilian Institute of Economics (Ibre), linked to the Getúlio Vargas Foundation, and by the Brazilian Institute of Commercial Ethics (Etco), reveals that the informal economy grew 8,7% in the period, more than the 5,4% of the GDP. Among the reasons for this deformation are those of a fiscal, tax and labor nature, which the country needs to face soon to include more and more workers in the formal market.
The damaging effects of the expansion of informality are neither reduced nor lost to the economy and society because, at the same time as it is registered, record numbers also occur in formal employment. Informality, in addition to representing a loss of taxes for public authorities, means a factor of unfair competition in relation to trade and industry that regularly pay their obligations and social and tax commitments.
The expansion of informality, which occurs even at a time when the whole economy is heated, needs to be faced either by firm and present supervision, or especially by structural measures capable of acting on the legal and bureaucratic roots of this institutional and economic disease. The country's growth will be greater and of better quality when it can occur without the distortions of informality and unfair competition.