Source: Jornal do Brasil, 15/05/2009

The index does not include precise data on the proportion that the sector represents in the national economy, but André Franco Montoro Filho, executive president of the Brazilian Institute of Ethics in Competition (Etco), says that, according to studies and statistics to which Etco had access , the underground economy represents between 20% and 30% of Brazil's Gross Domestic Product (GDP).

- There are estimates of up to 40%, but these I already consider exaggerated - points out the economist.

Reflections of turbulence

The rigidity in the labor market, the tax burden, the perception of corruption are directly related to the index, that is, the more rigid the market is and the more taxation is imposed, the more workers migrate to informality or evade taxes. Between September and December 2008, the perception of corruption was responsible for 31,5% of the growth of the underground economy, while the tax burden corresponded to 69,3% of the increase.

In the current turbulent scenario, therefore, the sector is under pressure in opposite directions: the deceleration of the country's economy, which, according to the premises of the study, would result in the contraction of the underground economy; and the drop in exports, which would give the index a boost.

Despite apparently not having suffered much impact from the financial crisis so far, experts expect that the underground economy will begin to follow the formal economy and reduce the pace of growth. This must happen due, among other factors, to the reflection of the employment scenario, which had not yet registered significant losses in the period covered by the study, and the drop in government revenue. In the last quarter of 2008, the sector's growth was 9,5% compared to the previous quarter. In the same period, Brazilian GDP fell by 3,6%.

To calculate the latest update of the Underground Economy Index, Fundação Getulio Vargas and Instituto Etco used informality data obtained by the Brazilian Institute of Geography and Statistics (IBGE), and information on the Central Bank's monetary circulation. (GC)