Source: Destak, 15/05/2009

The so-called “underground” economy, the production of goods and services that, for some reason, escapes official controls, such as smuggling or informal work, was driven by high taxes and the worsening of the crisis and grew in 2008 at a faster rate than the formal economy.

A survey carried out by the Getulio Vargas Foundation (FGV) and the Brazilian Institute of Ethics in Competition (Etco) shows that the informal economy grew 27,6% last year, the highest increase since 2003. Only in the last quarter, when the crisis worsened, did the high was 9,5%.

In 2007, the “underground” economy had grown by only 5% - 3,9% in the last three months of the year. The formal economy, measured by GDP (Gross Domestic Product), increased 5,1% in the year, but ended up falling 3,6% in the last quarter.

"The crisis did not affect the underground economy, because it does not use credit," said Fernando Barbosa, from FGV.

Tax Burden

The main driver of the expansion of informality was the 11,6% increase in the tax burden, according to the survey. Of the 27,6% growth, 55,5% refers to the increase in taxes.

The “hidden” economy was also fueled by a greater perception of corruption and an increase in formal economic activity.

“One feeds the other. The income earned in the formal economy is spent in the underground economy, and vice versa, ”said Barbosa. l

For the 1st time, government admits zero GDP growth

For the first time, the government admitted that the Brazilian economy, impacted by the global crisis, may be stagnant this year and that, in the best of scenarios, it may grow 2%, according to Agência Brasil.

The statement was made yesterday, in Brasília, by the Minister of Finance, Guido Mantega, who, however, emphasized that he does not expect a retraction of the Gross Domestic Product (GDP), contrary to the predictions of most Brazilian analysts heard by the Central Bank, who expect a retraction of 0,44% in the Brazilian economy.

Minister Mantega said he believed in “strong growth” in the economy in the last quarter, after a gradual recovery over the year.

He cited the increase in retail sales in March as a positive point.