Source: G1 - RJ - BRAZIL - 01/12/2009

From G1, in São Paulo

The underground economy grew only 1% above the Brazilian GDP (Gross Domestic Product) from December 2008 to June 2009, according to a survey released this Tuesday (1st) by Ibre - FGV (Brazilian Institute of Economics of Fundação Getulio Vargas) and by the Etco Institute.

In one year, however, from June 2008 to June 2009, the shadow economy grew 22,6% more than GDP. The underground economy is the production of goods and services purposely not reported to the government, to avoid paying taxes and labor costs and complying with standards. Illegal activities, such as smuggling and selling drugs, come into the account.

“The underground economy is very flexible”, says Fernando de Holanda Barbosa Filho, economist responsible for the research. “In the past year, the formal economy has been growing a lot and the underground economy too. Then there was the world crisis that blocked credit, but the underground economy does not depend on it ”, explains the professor.

Thus, the shadow economy continued to grow while the formal economy slowed or shrunk, which explains the 22,6% jump in one year.

In the past six months, however, the picture has changed: the level of activity in the formal economy has dropped, as has the tax burden, factors that have reduced the growth stimulus of underground activities, says Barbosa Filho.

According to the economist, the underground economy will grow again, but not at the levels seen before and during the crisis.