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Brazil's informal economy absorbs 60% of workforce

Monday, July 31st 2006 - 21:00 UTC
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Over half of Brazilian workers make their livings in the informal economy, estimated in 122 billion US dollars, according to an official report published Sunday in O Globo by the Brazilian Geography and Statistics Institute, IBGE.

The "under the table" GDP generated by 60% of the country's workforce is greater than the GDP of many countries, such as Colombia and Egypt, and has become a major challenge for Brazil's economic development and bureaucrats.

This informal GDP which involves 48 million people working in the informal economy is not included in the government's official economic statistics, nor are the workers covered by any of the country's vast labour and social security legislation.

"This is the country of soccer and informality" economist Marcelo Neri, head of the Getulio Vargas Foundation Social Policy Centre, is quoted by O Globo.

According to the IBGE paper the largest numbers of informal workers are employed in the textile and transport sectors.

Private sector analysts interviewed by O'Globo say that IBGE's estimates on the size of the country's informal sector could be "conservative".

"There are complete production lines that have not been included" said business consultant Ricardo Neves. One of the main sectors of the informal economy can be found in the small and medium business sector, where there are an estimated ten million companies that remain unregistered.

Spokespersons from the Brazilian National Confederation of Industry, CNI, argue that one of the reasons for the huge informal sector is the enormous bureaucratic difficulties and high costs of starting a business in Brazil, as well as the steep taxes "formal" businesses have to pay.

"Conditions for companies to be born, to grow and survive are extremely difficult", underlined Everardo Maciel, head of the CNI Micro and Small Business Council.

Elusion of bureaucracy costs and inefficient taxes is "great business in Brazil" and explains the strength of the informal sector, added CNI sources.

Brazil's "formal" GDP is estimated in 620 billion US dollars (2005); Colombia's 98 billion (2005); Egypt's 95 billion (2005) and Chile's 115 billion US dollars, (2005).-

Categories: Mercosur.

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