O Globo - 03/07/2011

The informal economy has decreased in Brazil and this has been reflected in the creation of formal jobs and an increase in tax collection. Some factors contributed to this formalization, among them the tax simplification for micro and small business segments (like SuperSimples), increase in exports and legal imports, and access to credit markets. In addition, states and city halls began to offer benefits (premiums, IPTU discounts, etc.) to consumers and users of services that require the issuance of invoices.

But, although these advances have occurred, the size of the underground economy in Brazil is still amazing. A recent study by the Getúlio Vargas Foundation, at the request of the Brazilian Institute of Ethics in Competition (Etco), estimated the informality index at 18,3% of the Gross Domestic Product, a value that would have corresponded to R $ 663,4 billion last year. The study is based on the demand for money in the economy and its relationship with formal credit operations. There is a mismatch between these two factors, as the circulation of money is more than proportional to the usual financial transactions, which masks the underground economy. IBGE data on the labor market also help in this estimate, since, according to the agency, almost half of the workforce in the six main metropolitan regions of the country remains without a formal contract.

The FGV study is a yellow light, as there is a stagnation in the process of relative decrease in the underground economy. In absolute terms, there was even an expansion, since, in 2009, the estimated number for informality in Brazil was R $ 632,9 billion (18,5% of GDP, slightly above the 18,3% in 2010). It is possible that the positive factors that contributed to the reduction of informality are no longer producing effects, which makes further progress necessary. Even with the simplification, the tax burden remains excessive, as well as the bureaucracy for calculating and collecting taxes, noted Etco's executive president, ambassador Roberto Abdenur, commenting on the FGV study.

Labor charges can also be seen as a stimulus to informality. Were it not so, the rate of workers with formal ties could not be restricted to a level of 50% in metropolitan regions. It is expected that some mechanisms, such as the individual entrepreneur, will have some effect in this effort to reduce the underground economy. Likewise, in the specific case of Rio de Janeiro, the multiplication of Pacifying Police Units (UPPs), coupled with a greater presence of municipal power in the favelas, may also favor the formalization of small businesses in these communities. In any case, without an effective national formalization effort, as Ambassador Abdenur pointed out, the underground economy in Brazil will remain at levels well above those observed in developed countries, such as the United States and nations of the European Union.

O Globo - Rio de Janeiro / RJ - FIRST NOTEBOOK - 29/06/2011

The underground economy, which includes the production of goods and services not reported to the government, moved R $ 663,4 billion in 2010. The amount corresponds to 18,3% of GDP, points out the Underground Economy Index released yesterday by the Brazilian Institute of Ethics Competitive (Etco) and calculated by Fundação Getulio Vargas (FGV) based on the demand for currency and data from the IBGE on the labor market. The percentage remained close to that determined in 2009 and 2008 (18,5% and 18,7%), which reveals that the informal economy has remained practically at the same level for three years. The indicator had been falling more strongly until 2008.

From 2003 to 2008 the size of the shadow economy in proportion to GDP had fallen from 21% to 18,3%. FGV researcher Fernando de Holanda Barbosa Filho says that this may mean that an important part of the economy has already been formalized and that, from now on, the process will be slower. According to him, the expectation for 2011 is a gradual fall.

- The underground economy is growing slightly less than the formal economy. But the only way to have an abrupt drop would be by institutional changes in factors that stimulate this economy, such as the strong tax burden and high labor costs in the country - says Barbosa Filho.

The economist also mentions the high corruption in the country and the drop in the share of manufactured items in exports as factors that prevent a further reduction in the size of the underground economy. On the other hand, the heated economy drives the formalization, required for access to credit by companies and individuals.

Handled volume is still very significant

Carlos Thadeu de Freitas, CNC's chief economist, says that the increase in computerization and the use of plastic money (cards) has also hampered the expansion of informality. For Freitas, the improvement in income is another favorable point, as it leads to the consumption of more sophisticated services.

The fact, emphasizes Etco, is that the absolute volume moved by the underground economy is still very high. The total calculated in 2010 exceeded the forecast released last November by the institution, of R $ 656 billion. It is also higher than the R $ 632,9 billion in 2009.

- The shadow economy has not grown as much as GDP, but it has not decreased. If the country maintains a satisfactory pace and improves tax and labor legislation, which is an unknown quantity, there will still be a long way to go before reaching levels in European and US countries - says Etco's executive president, ambassador Roberto Abdenur.

O Globo - Column Miriam Leitão - 28/06/2011

An Argentina or two Chiles. This is the size of the underground economy in Brazil, according to the Brazilian Institute of Competition Ethics (Etco) and the Getúlio Vargas Foundation. Because it is not formal, it is difficult to measure, but one can imagine the harm it does to the country. According to a study to be released today, last year it was R $ 663,4 billion or 18,3% of GDP.

The new president of Etco, ambassador Roberto Abdenur, explains that to reach the number, economists have to use approximation methods. One of the ways, says economist Fernando Holanda Barbosa Filho, is the calculation by the labor market. Even informal workers are included in IBGE surveys, such as Pnad, which covers all of Brazil, and the Monthly Employment Survey (PME), which is calculated in six metropolitan regions.

- The informal economy leaves traces such as those in the labor market and in the demand for currency, and we can calculate it by informal work or by the monetary method - says Barbosa Filho.

For these traces they calculate. It is always an imprecise measure, by its very nature, but it has become more sophisticated. In the future, we will try to include capital income and studies by economic sector and regions of the country.

The good news is that the economy they define as underground, which includes “goods and services not deliberately reported to the government,” has not grown. It was stable last year compared to the previous year as a proportion of GDP; in the series starting in 2003, the size of this shadow economy has dropped from 21% to 18,3%. The bad news is that even in a year of strong GDP growth, 2010, and in a period of greater formalization of employment, the size of this economy has not fallen, but has stabilized at around 18% of GDP.

One of the reasons, according to Fernando Holanda Barbosa Filho, is that although the PME shows a drop in informal employment, the national figure has not shown such a sharp drop.

Economist Luiz Schymura explains that the study is a tool for the organization of society:

- We entered into this endeavor with Etco because we think that this subject is little discussed. When the politician uses cash two to cover campaign expenses, society compromises; when he puts it in his pocket, there is a greater condemnation. Combating this Brazilian way is a fundamental discussion in Brazil today.

Abdenur explains that Etco does not lobby; it just wants to study, inform, give companies or the public sector tools to create a better business environment in the fight against piracy, evasion, and unfair competition.

Even higher figures have been released for the Brazilian informal economy, but Etco and FGV think that calculating, as they have done, is better than imagining a number.

- The underground economy is a symptom. It is not enough just to fight. It is necessary to make an effort to institutionalize the country - said Marcílio Marques Moreira, also from the institute.

An example happened in Bahia. Etco has partnered with the state finance department and Microsoft, which has developed a program that manages to cross-check information to avoid false fate; that is, the company declares that it is selling to another state to pay less ICMS.

- In this way, research work linked to electronic invoices is carried out. The ICMS is now the largest source of tax evasion through the simulation of the destination. The program takes this type of tax evasion, but the commitment to Microsoft was that it be shared with other states. And it really is, now it is Espírito Santo to implement the system - says Hoche José Pulcherio, president of the Board of Directors of Etco.

As an underground economy, they define the production of goods and services that evades taxes, does not pay social security contributions, evades compliance with labor laws and regulations and avoids the costs of complying with rules.

But as it is partly a symptom, what they want is to fight it through different ways. One is to simplify the payment of taxes in Brazil. The excess of norms is an incentive to enter informality or for a formal company to end up having part of its activities in informality.

This is exactly the confusion. There is no clear border between formal and informal, between legal and illegal in Brazil. There is an under-declaration of income. The formal sector provides for the informal, and benefits in part from the lower prices of informal suppliers. At the same time it is hampered by the competitor who does not pay taxes.

To undo this web that was forming in the economy, due to the complacency or the complexity of the country's rules, Etco wants to use FGV's studies on the topic to show how much the country loses. And to build coalitions between companies and the government that put pressure on the economy for ever greater formalization. This is what they did with the Ministry of Justice in the fight against piracy and with the IRS and Cade to combat unfair competition in the beer market.

O Globo - Column Miriam Leitão - 28/06/2011

An Argentina or two Chiles. This is the size of the underground economy in Brazil, according to the Brazilian Institute of Competition Ethics (Etco) and the Getúlio Vargas Foundation. Because it is not formal, it is difficult to measure, but one can imagine the harm it does to the country. According to a study to be released today, last year it was R $ 663,4 billion or 18,3% of GDP.

The new president of Etco, ambassador Roberto Abdenur, explains that to reach the number, economists have to use approximation methods. One of the ways, says economist Fernando Holanda Barbosa Filho, is the calculation by the labor market. Even informal workers are included in IBGE surveys, such as Pnad, which covers all of Brazil, and the Monthly Employment Survey (PME), which is calculated in six metropolitan regions.

- The informal economy leaves traces such as those in the labor market and in the demand for currency, and we can calculate it by informal work or by the monetary method - says Barbosa Filho.

For these traces they calculate. It is always an imprecise measure, by its very nature, but it has become more sophisticated. In the future, we will try to include capital income and studies by economic sector and regions of the country.

The good news is that the economy they define as underground, which includes “goods and services not deliberately reported to the government,” has not grown. It was stable last year compared to the previous year as a proportion of GDP; in the series starting in 2003, the size of this shadow economy has dropped from 21% to 18,3%. The bad news is that even in a year of strong GDP growth, 2010, and in a period of greater formalization of employment, the size of this economy has not fallen, but has stabilized at around 18% of GDP.

One of the reasons, according to Fernando Holanda Barbosa Filho, is that although the PME shows a drop in informal employment, the national figure has not shown such a sharp drop.

Economist Luiz Schymura explains that the study is a tool for the organization of society:

- We entered into this endeavor with Etco because we think that this subject is little discussed. When the politician uses cash two to cover campaign expenses, society compromises; when he puts it in his pocket, there is a greater condemnation. Combating this Brazilian way is a fundamental discussion in Brazil today.

Abdenur explains that Etco does not lobby; it just wants to study, inform, give companies or the public sector tools to create a better business environment in the fight against piracy, evasion, and unfair competition.

Even higher figures have been released for the Brazilian informal economy, but Etco and FGV think that calculating, as they have done, is better than imagining a number.

- The underground economy is a symptom. It is not enough just to fight. It is necessary to make an effort to institutionalize the country - said Marcílio Marques Moreira, also from the institute.

An example happened in Bahia. Etco has partnered with the state finance department and Microsoft, which has developed a program that manages to cross-check information to avoid false fate; that is, the company declares that it is selling to another state to pay less ICMS.

- In this way, research work linked to electronic invoices is carried out. The ICMS is now the largest source of tax evasion through the simulation of the destination. The program takes this type of tax evasion, but the commitment to Microsoft was that it be shared with other states. And it really is, now it is Espírito Santo to implement the system - says Hoche José Pulcherio, president of the Board of Directors of Etco.

As an underground economy, they define the production of goods and services that evades taxes, does not pay social security contributions, evades compliance with labor laws and regulations and avoids the costs of complying with rules.

But as it is partly a symptom, what they want is to fight it through different ways. One is to simplify the payment of taxes in Brazil. The excess of norms is an incentive to enter informality or for a formal company to end up having part of its activities in informality.

This is exactly the confusion. There is no clear border between formal and informal, between legal and illegal in Brazil. There is an under-declaration of income. The formal sector provides for the informal, and benefits in part from the lower prices of informal suppliers. At the same time it is hampered by the competitor who does not pay taxes.

To undo this web that was forming in the economy, due to the complacency or the complexity of the country's rules, Etco wants to use FGV's studies on the topic to show how much the country loses. And to build coalitions between companies and the government that put pressure on the economy for ever greater formalization. This is what they did with the Ministry of Justice in the fight against piracy and with the IRS and Cade to combat unfair competition in the beer market.

Valor Online - São Paulo / SP - BRAZIL - 28/06/2011

The Brazilian informal economy moved R $ 663 billion in 2010, equivalent to 18,3% of the GDP for the period, according to data from the underground economy index, released today by the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre / FGV) and by the Brazilian Institute of Competitive Ethics (ETCO).

The result was slightly above the forecast made in November by the institutes, of R $ 656 billion, and confirms the trend of stabilization of the index, in the last three years, at around 18,5% of GDP, after lower growth than the Brazilian economy. between 2003 and 2008.

“It is possible to detect that, in parallel with the healthy progress of the Brazilian economy - which has been going through a process of institutional modernization and increased consumption of goods and services, thanks to the growth in income - the acquisition of products generated in the underground economy also unfortunately , grown at the same rate, ”said ETCO Chief Executive Roberto Abdenur in the study's disclosure document.