Author: Rafael Rosas

Source: UOL Economy, 13/03/2008

SÃO PAULO - The “underground” economy, similar to informality, reached a level equivalent to 40,23% of the Gross Domestic Product (GDP) in Brazil last year, according to an estimate by the Austrian professor, Friedrich Schneider, professor at the University of Linz. For him, the level is well above that observed in countries like Greece, where informality is around 25% of GDP, Italy and Spain, around 20%, France, Germany and Holland, with 10% and the United States and Switzerland, with 8%.

According to Schneider, who specializes in “underground” economics, the peak of informality participation in Brazil was in 2004, with a share equivalent to 42,60% of GDP. The professor says that in order to reach the level of 20,71%, verified in 1995, Brazil needs more profound reforms in tax and social security issues.

"Even without reforms, the underground economy in the country should fall because of the GDP growth, which ends up bringing more people into formality", ponders Schneider, who forecasts a 39,42% slice of GDP for the underground economy this year.

The consultant of the Inter-American Development Bank (IDB), Vito Tanzi, recalls that part of the 40% of informality projected for the informal economy ends up being captured by the GDP accounts. According to him, if the entire “underground” economy were outside national accounts, Brazil would be a “much richer” country.

Schneider and Tanzi participated today in the international seminar Underground Economy - Causes and Consequences, promoted by the Brazilian Institute of Ethics in Competition (Etco), in Rio de Janeiro.

[Source: Valor Online]