Tag: Underground Economy Index

According to a study by ETCO and FGV / Ibre, stability in informality this year reflects the economic recovery

After growing for two consecutive years, the underground economy stabilized in 2017 and returned to represent 16,6% of the Gross Domestic Product (GDP). The calculation is from the Underground Economy Index (IES), a study carried out in partnership by the Brazilian Institute of Ethics in Competition (ETCO) and the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV / Ibre).

Informality in the country generated, in the 12 months ended in July, the equivalent to R $ 1,077 trillion. The number represents the GDP of countries like Colombia and South Africa. The underground economy is the production of goods and services not reported to the government deliberately, with the aim of evading taxes, evading social security contributions, circumventing compliance with laws and labor regulations and avoid costs arising from compliance with the rules applicable to each activity.

The IES has been held since 2003 and, until 2014, registered a constant improvement in the level of formalization of business in Brazil. During this period, the shadow economy fell from 21% to 16,1% of GDP. In 2015, the index suffered its first setback since the beginning of the historical series, a situation that worsened last year.

GRAPHIC IESSize of the underground economy

An important point for the resumption of the formal economy to take place, and to continue in the coming years, is labor reform. “ETCO's expectation is that the new CLT rules will bring about a safer environment for employers and workers. As a consequence, the judicialization of contracts tends to decrease and there will be more incentives to increase the number of employees with a formal contract ”, says ETCO's executive president, Edson Vismona.

Despite the prospect of future improvement, Vismona points out that the country cannot be content with just recovering what was lost in the past two years, without further progress. “A country that intends and needs to attract investments in order to develop cannot accept living with such high levels of informality”, he adds.

According to Fernando de Holanda Barbosa Filho, a researcher at FGV / Ibre, the informal market stopped growing with the end of the recession, but that was not enough to reverse the downward trend of the index. "With the prospect of GDP growth of more than 2,5% for 2018, the trend is for the economy to improve as a whole and positively impact the formalization of business in Brazil," he highlights.

 

About the Shadow Economy Index 

ETCO believes that knowing the size of the problem is critical to tackling it. Much is said, but little is known, about informality, piracy and evasion, as, as illegal activities, they are difficult to measure. The ETCO, in conjunction with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV / Ibre), has since 2007 published the Underground Economy Index, a study that estimates the values ​​of activities deliberately not declared to public authorities, with the objective of evading taxes, and those of those who find themselves in the informal sector due to excessive taxation and bureaucracy.

Slice of the informal economy in Brazilian GDP grows in 2016, says study

photo-informalityThe participation of the informal market in the Brazilian economy grew again in 2016, reflecting the economic crisis in the country, which has affected formal employment, according to a survey released on Monday.

The so-called underground economy - production of goods and services not reported to the government deliberately - reached 16,3 percent of GDP, against 16,2 percent in 2015, according to a study carried out by the Brazilian Institute of Ethics in Competition (ETCO) and the Brazilian Institute of Economics at Fundação Getulio Vargas (FGV / IBRE).

Comparatively, the participation of the informal economy in GDP exceeds that of the Northeast (12,3%), Midwest (9,5%) and North (5,8%) regions.

In nominal terms, the informal market moved 983,283 billion reais in 2016, compared to 956,96 billion reais in the previous year.

According to FGV / IBRE researcher, Fernando de Holanda Barbosa Filho, responsible for the study, the informal market is also affected by the crisis, but, as it manages to dampen a little more than the formal market, it has increased its relative weight in the economy .

"The crisis disturbs everyone," Barbosa Filho told Reuters, adding that this worsening should stop when the economic crisis in the country passes.

For now, however, the signs are not optimistic. The IBGE announced last week that Brazilian GDP shrank 0,8 percent in the third quarter compared to the previous three months, in the seventh quarter followed by contraction and with the biggest retraction in the year on this basis of comparison.

In the same vein, the Ministry of Labor's General Register of Employed and Unemployed (Caged) showed that 751.816 formal vacancies were closed in Brazil in the first ten months of the year, in the adjusted series.

(By Paula Arend Laier)

Reuters - 06/12/2016

KNOW MORE: UNDERSTAND THE UNDERGROUND ECONOMY INDEX (HEI)

Driven by the crisis, the informal market corresponds to 16,3% of GDP and is higher than the GDP of the North, Northeast and Center-oste regions

image-post-ies

The underground economy continued in 2016 the growth seen in 2015 and exceeded the Gross Domestic Product (GDP) of three of the five regions of the country, according to the Underground Economy Index (IES), a study carried out in partnership by the Brazilian Institute of Ethics Competition (ETCO) and the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV / IBRE). The main reason for the trend reversal, after 11 years of decline, is the Brazilian economic crisis, which had a major impact on formal employment.

According to the ETCO and FGV / IBRE study, in 2016, the informal market generated R $ 983 billion, corresponding to 16,3% of Brazilian GDP. It was an increase of 0,1 percentage point, but confirms the growth trend seen in the previous survey.

The underground economy is the production of goods and services not reported to the government deliberately, with the objective of evading taxes, evading social security contributions, circumventing compliance with labor laws and regulations and avoiding costs resulting from observing the rules applicable to each activity .

In comparison with the economic performance of the five regions of the country, the underground economy has a higher percentage of GDP than that of the North (5,8%), Northeast (12,3%) and Central-West (9,5%) %). With the current 16,3%, the ETCO and FGV / IBRE indicator is also very close to the GDP of the South Region, which in the 2013 IBGE survey accounted for 16,9% of the gross domestic product.

ETCO Executive President Edson Vismona says that combating informality must be a constant effort on the part of the authorities and society itself. “The informal economy has an impact on the whole of society, insofar as there is no payment of taxes. All investments are compromised and, in addition, an environment conducive to transgression and crime is created. ”

FGV / IBRE researcher Fernando de Holanda Barbosa Filho, responsible for the study, explains that the duration of the macroeconomic crisis leads the informal economy to continue growing. “The economic crisis interrupted the process of formalizing the Brazilian economy, reduced the number of companies, formal jobs and reduced the payment of taxes. The deep crisis that affects the entire economy has caused an increase in informality even with the mechanisms that stimulated the further formalization of the economy still in force. ” For the researcher, the resumption of growth should provide a return to the downward trend of the index. However, until that happens, the shadow economy must grow.

About the Shadow Economy Index 

ETCO believes that knowing the size of the problem is critical to tackling it. Much is said, but little is known, about informality, piracy and evasion, as, as illegal activities, they are difficult to measure. The ETCO, in conjunction with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV / IBRE), has been publishing since 2007 the Underground Economy Index, a study that estimates the values ​​of activities deliberately not declared to public authorities, with the objective of evading taxes, and those of those who find themselves in the informal sector due to excessive taxation and bureaucracy.

 

 

 

The street is a business counter

Experts say unemployment tends to increase until 2017, playing more informal in the market

Luciléia de Oliveira Rodrigues, 47, and her daughter Gláucia Rodrigues, 25, saw the opportunity for income on the street. “My other daughter started making pot cake to sell at college, and I thought: if it is working there, it will also work on the street”, says Luciléia. And it's giving. They sell about 80 units per day, at R $ 5. They leave around noon and return at 18 pm. They stay until 1 am making cakes. They had a beauty salon, but were forced to close their doors this year. “Customers were losing their jobs, and it didn't work anymore. We even try to look for a job, but they don't even wait for us to get right into the service stations and they already say they don't have a place, ”says Luciléia. According to economists, this lack of vacancies still lasts at least until the middle of next year and, consequently, informality will continue to grow.

According to the economist at Ibre / Fundação Getúlio Vargas (FVG) Fernando de Holanda Barbosa Filho, informality is more likely to drop significantly only in 2018. “In 2017, it is possible that it will stop increasing. Now, for this, it is necessary for the government to work on the tax issue ', says the economist.

He explains that the reflexes of the reduction in economic activity take a while to be felt in the job market: “The same logic applies when economic activity starts to grow again. Employment does not grow at the same rate. After all, the entrepreneur waits a while to find out if business growth is consistent. ”

“This year is already lost. GDP is expected to fall between 3% and 3,5%. The improvement should only come in the middle of 2017, because first the entrepreneur has to be sure that there will be demand; until then, current employees will work more overtime ”, analyzes Virene Matesco, professor of MBA in Economics at the Business School Institute (IBS / FGV).

Until then, the number of people doing what they can also tends to grow. “In a crisis, informality tends to increase exponentially, as people need to eat. And if you have no income or someone from the family to help you, you have to leave to look for an alternative, and creativity emerges. I have seen people selling everything and moving the shared economy through exchanges ”, he says.

Gláucia says that, after being discouraged from looking for a job with a formal license, going out to the street to sell cake was the best idea. She attached WhatsApp to informal work. "Many customers already place orders, and we take them there," he says.(With Juliana Gontijo)

Glossary

Underground economy. According to the president of Etco, Edson Vismona, it is the same as informality, that is, all goods and services produced without being declared and, therefore, without generating taxes

By: Queila Ariadne

Newspaper O Tempo (BH)

16/10/2016

Brazil should only recover stock of jobs lost after 2021

Since the beginning of 2015, the country has lost more than 2 million formal vacancies.
Recovery is expected to start in 2017, but will be slow, according to projections.

 

Even though some indicators start showing signs that the Brazilian economy has stopped worsening and may be bottoming out, the job market will need a few years to recover from the effects of the prolonged recession and absorb all those who have been laid off or not. they got a formal job.

Projections from consultancy Trends and GO Associados, based on market estimates for GDP (Gross Domestic Product), point out that only after 2021 will Brazil recover the level of formal jobs at the end of 2014, when the country lived a situation considered almost full employment.

Since January 2015, Brazil has lost 2,07 million formal jobs, according to data from the Ministry of Labor's General Register of Employed and Unemployed (Caged).

The country ended June with a stock of 39,1 million formal jobs compared to 41,2 million at the end of 2014. The record for the series was set in September of that year, on the eve of the presidential elections, when the total number of workers hired workers reached 41,8 million.

Already are 15 consecutive months of dismissals exceeding hires. Last year, Brazil lost 1,54 million formal jobs. In 2016, in the accumulated result for the year, until June, another 531,7 thousand jobs were eliminated in the celetist regime.

Loss of 1,3 million vacancies in 2016
Economist Luiz Castelli, from GO Associado, projects that the number of vacancies lost during 2016 will reach 1,36 million, totaling about 2,9 million formal jobs eliminated in the country in 2 years.

Falling wages and few alternatives
In an economy in recession, informality is bound to grow. The call underground economy increased for the first time in at least 11 years, according to a study by the Brazilian Institute of Ethics in Competition (ETCO) and Ibre / FGV, representing 16,2% of GDP, an increase of 0,1 percentage point in relation to the previous year.

IBGE figures show, however, that employment without a formal contract is no longer the escape valve for those who are unemployed. The number of informal workers rose to 10,083 million in June from 10,067 million 1 year earlier.

Even self-employment shows signs of saturation. There are almost 23 million Brazilians with this type of occupation, which brings together the self-employed, the so-called PJs (legal entities), individual microentrepreneurs (MEIs) and all those who do not pay wages for employees.

In the 12 months ended in May, the number of Brazilians working on their own grew by 3,9%, an increase of 857 thousand people. In comparison with the previous quarter, however, the number fell 1,1%, with an output of 263 thousand workers. See report from Jornal Nacional below

Source: G1- 07/08/16

To read the full story, click here

Underground economy grows again

by Evandro Guimarães and Fernando de Holanda Barbosa Filho (*)

The Brazilian underground economy represented, in 2015, 16,2% of the Brazilian GDP and grew in relation to 2014 (16,1%). This is the first growth in the annual comparison started in 2003, the initial year of the Underground Economy Index, built in partnership between the Brazilian Institute of Ethics in Competition (ETCO) and the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV / IBRE).

The underground economy is the production of goods and services deliberately not reported to the government, with the objective of evading taxes and evading Social Security contributions, laws, labor regulations and other norms that cause costs.

Failure to comply with laws and regulations, in addition to harming consumers, allows companies that use this expedient to continue operating. Companies that respect the law, on the other hand, suffer unfair competition, as they have competitors that do not bear all costs.

The increase in informality, although reduced, breaks the sequence of falls in this part of the activity that operates outside the law, and should be a cyclical event. The set of policies adopted that contributed to the recent reduction of the underground economy are still in operation and should return to the downward trend as soon as the crisis eases.

The reduction in the underground economy over the past few years (equivalent to 21% of Brazilian GDP in 2003) was the result of a set of measures that made the formalized activity more attractive. We observed a strong expansion of the credit market and a gradual increase in the average schooling of the population. The expansion of credit stimulated the formalization of both companies and workers. Formalizing the company and employment is, in most cases, an essential condition for accessing the credit market. The expansion of formal education raises wages, the bargaining power of workers and increases their chances of getting formal employment.

There was also the adoption of measures that sought to simplify compliance with legal norms and reduce their costs, such as the creation of Simples, Simples Nacional and Individual Microentrepreneur (MEI).

The reduction of the underground economy is important for the country. Informality brings direct damage to society, creates an environment of transgression, stimulates opportunistic economic behavior, with a drop in the quality of investment and a reduction in the growth potential of the Brazilian economy. The road is long, much has been achieved, but we still have a lot to do.

 

* Evandro Guimarães, Executive President of ETCO, and Fernando de Holanda Barbosa Filho, researcher at FGV / IBRE

 

Fernando de Holanda Barbosa Filho, researcher at Ibre / FGV speaks to CBN about the Underground Economy Index

Listen here to the interview given by Fernando de Holanda Barbosa Filho to Radio CBN on 28/06/16:

 
KNOW MORE: UNDERSTAND THE UNDERGROUND ECONOMY INDEX (HEI), ascertained by the Brazilian Institute of Economics (Ibre) of the Getúlio Vargas Foundation (FGV), in partnership with the Brazilian Institute of Competition Ethics (ETCO).

Understand the Underground Economy Index

Since 2007, ETCO – Brazilian Institute of Competition Ethics, together with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre/FGV), have published the Underground Economy Index (IES), a study that estimates the size of the informal economy in the country. .

PDF version: UNDERSTAND THE UNDERGROUND ECONOMY INDEX

What is underground economy

A underground economy is the production of goods and services not reported to the government deliberately to:

  • Evade taxes.
  • Evade social security contributions.
  • Circumvent compliance with labor laws and regulations.
  • Avoid costs resulting from the rules applicable to each activity.

The partnership between ETCO and Ibre/FGV to monitor the underground economy provides the country with the main indicator of the evolution of informal activities. Knowing the size of the problem is fundamental to combating it. In Brazil, informality is stimulated by high tax burden, corruption and unemployment. The result is well known: evasion, smuggling and piracy, which generate serious competitive imbalances.

How is it calculated?

O Underground Economy Index is calculated by averaging two important economic indicators.

monetary method = Increase in the currency due to the tax burden and the informality of work.
Informal work = Percentage of workers without a formal contract and income from informal work.

Composition of shadow economy

Illegal activities

monetary transactions
Sale of stolen goods and products, drugs, prostitution, gambling, smuggling and fraud.

non-monetary transactions
Trading drugs, stolen goods, contraband, etc.
Theft and production of drugs for own consumption.

legal activities

Undeclared income self-employed and informal worker.
Norms and rules applicable in a given activity.
Exchange of legal goods and services. Work carried out at home and/or with neighbors.

Underground economy historical series

Check the evolution of the Underground Economy Index since 2003