Formal economy drives the underground


Source: Jornal do Commércio Brasil (RJ), 19/11/2008

The expansion of the formal economy does not decrease the level of informality, the so-called 'underground economy'. On the contrary: it even drives.

The figure appears in the second edition of the Underground Economy Index, by FGV (Fundação Getúlio Vargas) and Etco (Brazilian Institute of Competition Ethics), released yesterday.

The non-formalized economy advanced 4,7% between December 2007 and June 2008, compared to the size it had in the previous semester. In the same semester, GDP increased 6% (compared to the same period in 2007).

The study by researcher Fernando de Holanda Barbosa Filho shows that the expansion of the formal economy does absorb informal workers, which does not slow down the underground economy. This, in turn, expands in the wake of the accelerated consumption of new formal workers. The study dispels another myth, which estimates the share of the underground economy in GDP at 40%. "We still cannot measure exactly that, but 40% is an absurd number."