Author: Henrique Gomes Batista

Source: O Globo Online - RJ - ECONOMY - 01/12/2009

RIO - The Brazilian Institute of Economics (Ibre) of the Getulio Vargas Foundation (FGV) reported on Tuesday that the country's informal economy grew above the variation of the formal economy this year. According to the Index on the Subterranean Economy, made in partnership with the Brazilian Ethical Competition Institute (Etco), the variation was positive by 0,9% over the variation of the Gross Domestic Product (GDP, sum of goods and services produced in the country) ) between December last year and June this year. In the annual variation, that is, from June last year to June this year, the informal economy grew 22,6% above the GDP variation.

- In the previous six months, at the end of last year, during the period of greatest impact of the crisis, the underground economy grew strongly, there was a detachment in relation to the movement of the formal economy, which slowed down due to the fall in credit. But this year we see that the formal and informal economies are very similar - informed Professor Fernando de Holanda Barbosa Filho.

Among the activities considered in the index are illegal ones (prostitution, drug trafficking, buying and selling stolen products) and those that are legal but informal, often to avoid paying taxes and labor rights:

- There's everything here, I can't say that the whole underground economy is bad. Here is the street vendor who, with incredible flexibility and speed, sells umbrellas at the subway door minutes after it starts to rain. But the underground economy is a symptom that something is wrong - he says.

This index is calculated taking into account variables such as tax burden, level of activity, perception of corruption, exports, rigidity, fraction of workers without a formal contract and paper money for deposits. Part of the data is obtained from IBGE's Monthly Employment Survey. In the case of the evolution at the beginning of this year, says Barbosa Filho, what weighed most on the positive variation of the index was the perception that corruption increased:

"This data is obtained by an international agency," he explained.

The professor believes that the informal economy should maintain a growth above the GDP variation in the second half of 2009 and in the beginning of 2010. According to him, this will happen because the heated economy also encourages the informal economy and the recovery of the federal tax collection will increase the burden tax will give more attractiveness to activities outside the law.

The director of the Etco Advisory Council, Marcílio Marques Moreira, recalled that it is still not possible to say with certainty how much the formal economy represents of GDP - there are very different estimates, ranging from 11% to 45% of the economy. But, according to him, it is necessary to know these realities better:

- We plan to hold a seminar on the topic in 2010. We have to have a bridge between these two worlds, which are already related, because often the umbrella that the street vendor sells when it is raining was bought in the formal market. We need to make the formal economy lose some of its rigidity and the informal economy to move towards formality.