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Brazil's Informal Economy

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Natalie Malawey-Ednie

on 5 May 2010

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Transcript of Brazil's Informal Economy

Introducing the Informal Economy Why Brazil? Why the Informal Market? Explosive National Economic Growth 476% Increase in GDP, 1998-2008 (Brazil at a Glance, 2009) Income and Asset Disparity Increasing Informal Economy est. = 40% of GDP (Farrell, D., 2006) Poverty 1 in 4 lives in 1 in 5 Metro Areas (Lawrence, 2008) Lack of Education Average 25 y.o. < 4.56 years of school (Duryea, S. & Pages, C., 2002) Crime Increased Informal Economic Activity 55 - 62% of the population employed here (Capp,J., 2005) So how does a nation support growth that doesn't leave the poor behind? Defining the Informal Economy No single, conferred upon definition An 'unregulated process of income generation' (Castellis, M. & Porters, A., 1989) 1970's
Informal Sector 1989-Today
Informal Economy 5 General Characteristics 1. It's a PROCESS.... not an Object Dynamic Relationships between a variety of partners 2. It is UNREGULATED Registration, Safety Procedures, Environmental Protection, etc. 3. Activity is UNTAXED Activity is not reported.... therefore, not taxed No real opportunity for scalability 4. Enterprises generally operate with a SMALL SCALE of Operations 5. Methods of production are generally LABOR-INTENSIVE Limited access to capital and new technologies Brazil's Informal Economy by the Numbers Brazil's GDP est. at $2 trillion

Brazil's Informal Economy~40% of GDP = $800 billion

55-62% of total population employed in Informal Market

1992-2002 = 87% of all jobs created

China~13.1%, India~23.1%, Average 32.5% (CIA World Fact Book, 2010) (Capp, J., 2005) (Capp, J., 2005) (Capp, J., 2005) Clearly the Informal Economy extends across a wide range of players/activities Brazil: Informality as a % of Workforce Examples of Enterprises in the Informal Economy Subsistence Enterprises
lack of resources (education, capital, social network, etc.)
it's all about survival
Catadores and Jardim das Flores
Solo Entrepreneurs
produce kiosk/vendors
Service and Retail Operators
95% of all street vendors operate informally
Grupo Pao de Acucar ~ 50%
Unregistered cabs, buses, etc.
Plast Friso Do Brazil, Ltda. - bumper guards, side guards for cars
- employs 24 people
- Informality = flexibility & competitiveness
Brazil's Informal Economy
The Favela Experience Growth Factors & Impacts Current Strategies & Recommendations Factors -
economic - legal - cultural - political Impacts to -
informal businesses & employees -
formal businesses - government Economic Factors Economic Factors Cultural Factors Political Factors Impacts to
Informal Businesses Impacts to
Informal Employees Impacts to
Formal Businesses Impacts to
Government & Nataional Economy The tour guide The 'Entrance' Retail & Commerce 'Becos' Utilities & Services Their view Inequitable distribution of wealth
Lack of Assets Among the Poor
Limited Employement Opportunities
High Inflation Rates
High Cost of Debt Financing

Legal Factors Bureaucratic Business Registration Procedures
Weak Regulation Enforcement
High Tax Rates & Complex Tax Structures
Lack of Property Rights

Lack of Education
Deteriorating Social Structures

Big Government
Inconsistent Infrastructure

Avoidance of:
- High cost of business registration
- High tax rates & complex tax structure

Limited opportunity for growth
Cost of 'fees' to regulators

Greater respect & autonomy than the formal economy

Lack the benefits & rights of workers in the formal economy

Unfair competiton based on price
Limits ability to grow

It undermines the valuation of a nation's credit risk
Determent of investment and productivity growth
Minimizes competitiveness of the economy
Decreases overal productivity of the economy
Increases poverty and social inequities
Loss of tax revenues

good place for movie clip on catadores if have
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