Brazil has an informal Portugal


By Luciana Rodrigues and Flávia Oliveira, O Globo - 20/05/2005

Small informal businesses are the source of work for a quarter of Brazilians engaged in non-agricultural activities. They are self-employed, people who live on their bills, micro-entrepreneurs or employees of firms outside the formality. And that, with great frequency, they became entrepreneurs not for vocation, but for lack of option. In its most recent survey on the informal urban economy, IBGE counted 10,34 million small enterprises of this type in 2003, which employed 13,86 million people, equivalent to 25,45% of the workforce in Brazilian cities, except domestic workers. It is an army of workers superior, for example, to the entire population of a country like Portugal (10,56 million).

However, the weight of this sector in the Gross Domestic Product (GDP, sum of all the country's wealth) is much less. The revenue from these businesses? an average of R $ 17,6 billion per month in 2003? represents about 6% of GDP, according to an IBGE estimate. The figures show that the informal sector has a social function, absorbing labor and mitigating the labor market crisis, much greater than its economic role in generating wealth.

? If these people were unable to act and guarantee their survival, would they be putting pressure on the labor market, on the one hand, and government income transfer programs, on the other? said Angela Jorge, coordinator of Work and Income at IBGE.

Informality reaches 98% of businesses

Since 1997, the reference date of the last IBGE survey of this type, the number of workers in informal businesses has grown 7,7%. It is almost double the 4% expansion registered, in the same period, in the total of employees in non-agricultural activities in Brazil, with the exception of domestic service. In other words, without the informal sector, urban unemployment between 1997 and 2003 would have grown much more.

But, on the other hand, small non-formalized businesses lost share in GDP, since in 1997 it accounted for 8% of the total wealth generated in the country. This is a reflection of the impoverishment of these entrepreneurs and their employees.

Informality reaches 98% of non-agricultural enterprises with up to five employees. And it brings together a wide universe, ranging from street vendors to micro-entrepreneurs, including artisans. Altogether, 69% are self-employed, 10% are employers, 16% are employees with and without a formal contract and 5% work without pay.

Most of the time, they are informal due to lack of opportunity: 31,12% said they started their business because they did not find a job and 17,62% said they sought an income supplement. Only 16,47% became entrepreneurs due to a desire for independence.

? The informal sector functions more as a safety net than as a springboard. Do people set up businesses out of necessity, not entrepreneurship? said Marcelo Neri, head of the Getúlio Vargas Foundation's Social Policy Center (FGV). ? Proof of this is that a third of the owners say they started the business because they could not find a job.

José Ferreira de Pinto, 60 years old, came up against young people in barriers to enter the formal market. He left Acre at the age of 23 with plans to become an Air Force doctor in Rio. He failed to join the Armed Forces. But, having never sat on a school bench until the age of 16, he completed his old high school degree at a seminar, took the entrance exam, studied for two years in the philosophy course at PUC-Rio and graduated as a lawyer at the same university. The diploma and portfolio of the Brazilian Bar Association (OAB) are a source of pride, and nothing more.

? I never practiced law. The beginner's salary was very low and, without a family in Rio, I had no way to support myself? recalls the lawyer, who after working 30 years with flower decoration in churches, today owns a clothes stand at the Uruguaiana camelódromo.

Self-employed workers are the most motivated by necessity. Among the men in this group, 37% opened the business due to a lack of chance in the job market, while 34% of women went to supplement their family income. Another indication that the formal market inhabits the dreams of most informal entrepreneurs is the high number (15,90% of the total) of those who said, when asked about plans for the future, that they intend to leave their businesses and look for jobs.