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Brazil Has Over 10 Million Informal Enterprises

May 19, 2005 10h00 AM | Last Updated: August 23, 2018 12h49 PM

Informal economy generated, in 2003, an income of R$ 17,6 billion and employed over a fourth of non-agriculture workers in the country

In October 2003, there were in Brazil 10.525.954 small non-agricultural enterprises. Out of that total, 98%, that is, 10.335.962 belonged to the informal sector and employed 13.860.868 people. In relation to the previous survey, from 1997, the number of small enterprises has increased 10% , whereas the number of enterprises in the informal sector has increased 9%, indicating a tendency towards formalization. The increase in job opportunities in informal enterprises was about 8% in the same period. In terms of federative units, São Paulo, Minas Gerais, Rio de Janeiro, Bahia and Rio Grande do Sul held, together, 57.6% of the informal sector in the country. The data are from the Urban Informal Economy Survey 2003 (ECINF 2003), conducted by IBGE in partnership with Sebrae. The survey provides information on the characteristics and financial aspects of enterprises, formalization indicators and access to credit, besides performance evaluation and prospects.

Considering informal sector workers, 69% were own-account workers, 10% employers, 6% registered workers , and 5% had unpaid jobs. These percentages have changed little in relation to 1997. In most categories, there was a predominance of male workers ( 64% of all workers). The exception was the category of unpaid jobs, with 64% of female workers, corresponding to 3% of the total number of workers.

A great number of informal enterprises belong to own-account workers

Most informal enterprises (88%) belonged to own-account workers. Only 12% belonged to minor employers . Out of the enterprises included in the survey, 95% had a single owner, and 80%, only one worker.

The most relevant activity to the informal sector was Commerce and Repair (33%), followed by Construction (17%) and Quarrying and Manufacturing Industry (16%). 99.8% of all the small enterprises in the Construction segment belonged to the informal sector. The second highest percentage was that of the Social and Individual Services segment: 99.3% of the enterprises related to this kind of activity were informal. On the other hand, Real Estate Services and Services Rendered to Enterprises had an increased participation of formal enterprises (4,3%).

Over half of the informal enterprises lack an accounting record

The number of informal enterprises without an accounting record has increased. In 2003, 53% did not have any kind of accounting record and, in 36% of them, the owners did accounting work without the help of an accountant. In 1997, those percentages were 46% and 39%, respectively. Employers’ enterprises made more use of accounting services and only 21% did not keep any record of it. Among own-account enterprises the percentage was higher, 57%.

Out of all the enterprises in the informal sector, 88% did not have an internal constitution; 93% of this total were own-account enterprises and 56% were employers’ enterprises. Among those that had a constitution, 93% had a monthly income of over R$ 2,000,00. 72% of the companies which did not have an internal constitution had an income of about R$ 1,000,00 monthly.

On average, 74% of the surveyed enterprises did not have a municipal or state license ; that pattern varied according to the type of activity. Approximately 90% did not have a micro-company registration; the pattern in this case varied little according to the different types of activity.

Few enterprises (2%) had implemented the SIMPLE tributary system up to the end of 2003. Most of those which did belonged to the Commerce and Repair segment (53%). In relation to own-account enterprises, 79% declared not to be regularized; among minor employers’ enterprises the percentage was much smaller (34%).

Number of profitable informal enterprises decreases between 1997 and 2003

In 1997, 93% of the informal enterprises were profitable, a percentage that fell to 73% in 2003. The table below shows that, within the period, there was a significant decrease in the average net profit of enterprises belonging to own-account workers, whereas no change was observed in employers’ enterprises. Considering profitable enterprises, most of them (36%) belonged to the segment of Commerce and Repair. It is worth pointing out that the average monthly income of employers’ enterprises (R$ 6.033,00) was five times higher than that obtained by enterprises belonging to own-account workers (R$ 1.164,00).

Most of the informal sector enterprises (94%) did not make use of credit services in the development of their activity within the three months preceding the survey. The companies which did had, as their main source of funds: public or private banks (58% of the enterprises), suppliers (16%) and relatives or friends (16%). In November 2003, like in 1997, 83% of the enterprises in the informal sector did not have any kind of debts.

Enterprise location

In terms of enterprise location, the survey showed that 65% of the surveyed enterprises developed their productive activities out of company area; 27%, exclusively in the owner’s dwelling and 8% in the owner’s dwelling and out of it, a result influenced by the kind of activities performed by the company. In relation to own-account enterprises, 63% functioned only out of the owner’s dwelling. The percentage in the case of employers’ enterprises reached 79%.

Approximately 89% of the surveyed companies – especially those run by own-account workers – were in operation every month of the year 2003. Only 7% of the enterprises of the informal sector had a seasonal variation, whereas that happened in 23% of the enterprises in the education, health and social services segment.

About 70 % of the production units used their own equipment and/or facilities, most specifically tools or work apparatuses.


São Paulo holds 25% of the informal sector

In 2003, the states of São Paulo, Minas Gerais, Rio de Janeiro, Bahia and Rio Grande do Sul held 57.6% of the informal enterprises and 56.8% of the total small enterprises surveyed. The percentage of workers in those five federative units corresponded to 56.4% of the 13.9 million informal workers. São Paulo alone concentrated 25% of the total, that is, 2,581,820 informal enterprises, followed by Minas Gerais, with 10.3% (1.049.774 enterprises) and Rio de Janeiro, with 8.4 % (863.435 enterprises).

The participation of small enterprises in the informal sector occurred mainly in Espírito and Acre, with 99.45% of enterprises. Mato Grosso had the highest percentage of formal enterprises (3.97%). Out of its 141,133 small non-agricultural enterprises, 5.610 were formal.