Source: Folha de Dourados - Dourados / MS - ECONOMY - 21/07/2010

Source: The Tribune

The production of goods and services not reported to governments, called the 'underground economy' by Fundação Getúlio Vargas, jumped from R $ 357 billion in 2003 to R $ 578 billion in 2009, revealed the Underground Economy Index, released on Wednesday . However, the share of these amounts in the Gross Domestic Product fell: it went from 21% to 18,4% of the total wealth generated by the Brazilian economy.

The survey estimates the income generated by activities that seek to avoid costs arising from labor and production, such as illegal trade, tax evasion, informal labor, prostitution, smuggling and drug trafficking.

"To give you an idea of ​​the seriousness of the problem, just remember that Brazil's underground economy surpasses the entire Argentine economy," said André Franco Montoro Filho, director of the Brazilian Institute of Ethics in Competition (ETCO), FGV's partner in publicizing the index .

As explained by the researcher at FGV's Brazilian Institute of Economics, Fernando de Holanda Barbosa, responsible for research, the modernization and growth of the Brazilian economy influence the drop in the participation of these illegal and / or informal activities in GDP: the expansion of credit to workers formalized, improvement in inspection techniques and measures to encourage the formalization of work, such as Supersimples, a simplified tax collection system for micro and small companies.

Today the worker prefers to earn a little less to have access to real estate credit, which requires proof of income, says Barbosa. The more open the economy, the more formal it tends to be, he said, noting that the economic expansion encourages entrepreneurs to hire more formal employees.

The increase in volume and the drop in the participation of production in these activities in the GDP are explained because, between 2003 and 2006, the Brazilian GDP practically doubled, from R $ 1,7 billion to R $ 3,14 billion.

Informal work

The index was calculated based on data on the demand for money generated by these activities and the size of informality in the labor market in the same period. The share of income generated by informal work in Brazil, according to FGV, fell from 16,9% to 14,9% between 2003 and 2008. The percentage of workers without a formal contract also fell: from 25,8% to 22,8% %.

According to the FGV researcher, the share of the underground economy in the GDP of the rich countries of the OECD (Organization for Economic Cooperation and Development) averages 10%; in emerging countries, about 30%.

“It is different to compare Brazil's figures in percentage and absolute values. If Bolivia, for example, has 60% of the GDP of the underground economy, it is still a much lower value than what exists in Brazil today ”, said Barbosa.

To draw up the Underground Economy Index, FGV had as its main basis the data from the National Household Sample Survey (Pnad) from IBGE, whose series started in 2002.

Legal X illegal

In the assessment of the president of ETCO's advisory council, Marcílio Marques Moreira, it is necessary to differentiate activities related to illegal products, such as drug and arms trafficking, from those of legal but informal products, such as street vendors. Everyone who buys an umbrella from a street vendor on a rainy day is a little informal, he says.

Another difficulty in measuring the income from these activities is that they mix. Part of that income generated in informality goes back to the economy. A street vendor, for example, makes a purchase at the supermarket. The government receives part of this in revenue, but we have not been able to measure the impact of this, says Barbosa, from FGV.