The news agency EFE reports that 60% of Brazilian workers are employed in the informal economy. EFE based these numbers on a report that was just released by the Brazilian Geography and Statistics Institute (IBGE)
According to EFE:
One of the main areas of the informal economy is in the small and medium-firm business sector, where there are calculated to be around 10 million unregistered companies.
Spokesmen with the National Confederation of Industry, or CNI, say that one of the reasons for the huge informal economy in the South American giant is because of the enormous bureaucratic difficulties and high costs of starting a business in Brazil, as well as the high taxes.
According to the World Bank’s Doing Business database that provides comparative data on business regulations, their enforcement, and specific regulations that enhance or constrain investment, Brazil ranks in place 119 out of 155 countries.
Brazil’s tax system is among the worst in the world ranking in place 140 out of 155. A medium size company in Brazil must make 23 tax payments, spend 2,600 hours and pay 147.9% of its gross profits in taxes. In comparison, a Brazilian medium size company is required to pay three times more taxes than a similar company that is based in one of the OECD countries.
A friend once told me that “Brazil is the country of tomorrow and always will be.” Brazil has registered an impressive economic growth rate in recent years, however, unless it makes an effort to truly implement economic reforms, such as reducing the barriers to entry into the formal economy, a majority of the population will continue to live on the margins. Hopefully Brazil will learn this lesson quickly and prove my friend wrong.
Published Date: August 01, 2006