Competition numbers that are worth a thousand words


By Emerson Kapaz

There are many ways to assess illegal competition in Brazil. One of them is that the informal economy serves as an antidote against the disease of unemployment, today, of about 12% of the economically active population, which points to an equally disturbing drama.

Between December 2002 and October 2003, judging by the data from the Brazilian Institute of Geography and Statistics (IBGE), the average worker income dropped 11,6% and, annually, about 1,2 million people have been searching, with little success, vacancies in the market.

When asked what is at the root of this spiral that floods large and small cities, the first reaction is to blame the economic crisis. It is a correct assessment, but incomplete. Among the many reasons for unemployment, the impasse of competition from companies that evade taxes, stealing from the public coffers something like R $ 160 billion reais, is aligned every year.

Let's see what a recent study by McKinsey consultancy finds:

· Informal companies tend to have little investment scale and little skilled labor.

Brazil is among the worst countries in the world in terms of labor laws

· The few developing countries that have made progress in eliminating the Gross Domestic Product / per capita income gap have never experienced informality problems, such as Japan, Singapore, Taiwan and Korea.

· In Brazil, it is estimated that a reduction in informality levels from 50% to 40%, over the next ten years, would contribute to the country reaching levels of GDP growth per capita of 7% per year in relation to 3,5, XNUMX% in the same period if this ratio remains at the current level.

In addition, the losses resulting from illegal practices are much higher. Calculations by Unafisco, the entity that brings together tax auditors from the Federal Revenue Service, indicate that smuggling today moves R $ 35 billion, with tax losses of around R $ 23 billion, which means the loss of 1,5 million jobs per year, only in Greater São Paulo.

These numbers are worth a thousand words. According to the World Bank and the International Labor Organization, in general, the informality rate in developing countries ranges from 20% to 80%. In Brazil, the rate is very high, 50%. That is, five out of ten jobs are informal. Ten years ago, the ratio was four to ten. In the same period, the tax burden jumped from 24% in relation to GDP to more than 35%.

In addition to the increase in the tax burden, the combination of the complexity of regulation on services and products, intricate and restrictive labor laws and the inefficiency of the courts have contributed to the expansion of informality. Add to that the lack of economic growth that has been raging since the 80s with devastating effects on employment and income statistics.

Persisting on this path is a very big risk, part of which is associated with the emergence of the threatening parallel state that finances organized crime. Illegal competition does not just stifle development. By cutting the oxygen from ethical companies, those that comply with their legal obligations, it neutralizes possibilities for business expansion and, as a result, limits the supply of formal jobs.

On the other hand, it strikes the State's investment capacity by brutally reducing revenue. Changing the current reality and making informality recede is not impossible. The first step is to work towards reducing the tax burden.

In parallel, a program to reduce bureaucracy would help to encourage productive investments. Here are the reasons, in McKinsey's assessment:

· It takes 86 days to start a business in Brazil against four days in the United States and two in Australia.

· Brazil is among the worst countries in the world in terms of labor laws - its score is around 80% negative in all aspects. It is the worst ranking in all of Latin America.

· Ten years are required to complete the insolvency procedure in Brazil versus three years in the United States and five months in Ireland.

President Luiz Inácio Lula da Silva's government set out to create 10 million jobs. The numbers are being revised because, even though the economy is growing again on a solid basis, technological progress tends to restrict the supply of jobs. Studies show that in the last 11 years, since the opening of the economy, the country has lost 10,8 million jobs.

One way to compensate for such significant losses is to reduce limitations and build alternatives to reduce informality. Initiatives in this direction are already gaining visibility. The experience of the Brazilian Institute of Ethics in Competition is emblematic. We managed to create a favorable climate for combating tax evasion, adulteration of brands and smuggling. There are task forces working in an increasing number of states for this purpose.

The most varied sectors of the economy are articulating in the search for the affirmation of competitive ethics. The need for a simple, efficient and democratic tax system is clearer than ever, that is, with lower rates and an increasing number of taxpayers.

Thus, it will be easier to find a safe way to sow development with a growing supply of jobs and also an improvement in income. It is an alternative that sooner or later the government and society will have to face. Better start now.

Emerson Kapaz is president of the Brazilian Institute of Competition Ethics (ETCO).