Informality doubles in the country


Author: Ricardo Rego Monteiro

Source: Jornal do Brasil, 13/03/2008

The economic weight of illicit activities practically doubled in Brazil between 1995 and last year. At least that is what a survey produced by Austrian economist Friedrich Schneider, from the University of Linz, Austria, concludes, who compared the level of informality in the Brazilian economy with 20 other Latin American countries. Creator of a calculation methodology that measures the importance of the so-called underground economy for a country, Schneider reveals that, if the irregular activity produced the equivalent of 20,71% of the Brazilian Gross Domestic Product (GDP) in 1995, in 2007 it became responsible for a value equivalent to 40,23% of the total wealth.

The good news is that, since 2004, when it reached 42,60% of GDP, the weight of illicit activity has decreased in the country, in the wake of the resumption of more vigorous growth rates. For this year, Schneider projections indicate a drop to the equivalent of 39,42% of GDP. The growth allowed the incorporation of part of the working contingent to the formal economy, he says.

Schneider participated yesterday, in Rio, with the Italian economist Vito Tanzi, of the seminar Underground economy: causes and consequences, promoted by the Brazilian Institute of Ethics in Competition (Etco). On the occasion, he stated that, no matter how large the country's growth in the coming years, Brazil will only reduce the weight of informality to 1995 levels if it promotes institutional reforms that ensure greater dynamism to the Brazilian economy. Among them, the tax and Social Security.

Both Schneider and Tanzi made a point of differentiating, before the seminar, the difference between informal and underground economics. The first, according to Schneider, includes activities that are not regulated by the state, but do not necessarily involve criminal practices, such as the underground economy. In a ranking of 21 countries in Latin America, prepared by Schneider, Brazil occupied, in 2005 and 2006, the 11th place among the most informal, behind Paraguay and Chile, Costa Rica and Argentina - the three with more formalized economies. Among the biggest causes of informality are factors such as high tax burden, excessive regulation of the economy, a large number of prohibitions and corruption rates.