Author: Victor Martins

Source: Correio Braziliense - DF - ECONOMY - 02/12/2009

While the global economic crisis has weakened the economy, the market formed by informal enterprises has followed the opposite path and has expanded strongly since the last quarter of last year. Also known by underground economists, this informal segment increased its participation in the Gross Domestic Product (GDP, the sum of everything produced in the country) by 22,6% between June 2008 and the same month this year.

The unemployment generated by the crisis would have been one of the reasons for the flight to informality, but not the main motivation for the expansion of the sector, according to economist at Fundação Getulio Vargas (FGV) Fernando Barbosa Filho. “The relatively high level of economic activity in which the country has remained and an attempt to escape labor and tax burdens has caused activity in the sector to increase,” said Barbosa, who is one of those responsible for FGV's underground economy indicator.

For the president of the Brazilian Institute of Ethics in Competition (ETCO), André Franco Montoro Filho, sponsor of the underground economy index, the numbers show that if informality expands, “something is wrong in the country”. "The informal economy discourages serious companies, which generate Brazil's progress," he said. In the research, the production of goods not reported to the government in order to evade taxes (1) and social security contributions and to avoid compliance with laws and costs arising from legislation was treated as a shadow economy.

According to FGV economist Fernando Barbosa, the credit problem faced by the world since the economic crisis, which started in September last year, would have impacted the performance recorded by informals in the last year. "We went through a credit crisis and, as the underground economy does not work with financing, it did not feel the crisis as the formal sector", said the economist when he justified the fall of the formal economy against the illegal one.

1 - Escape of taxes

Informal enterprises do not pay taxes and contributions, which is reflected in a lower tax collection for the government - resources that stop going to investments in infrastructure, health, education and security.