Informal Economy

This is from "The News" the English-language newspaper in Mexico City. For the full article, see http://www.thenews.com.mx/home/tnhome.asp?cve_home=2074

More than 1.05 million people in the capital city make their living by selling goods and services from their house, door-to-door, on the streets, outside formal businesses and even from their cars, according to Benito Mirón Lince.

A recent report from the American Chamber of Commerce in Mexico showed that nine out of 10 Mexicans buy pirated goods, causing more than 964.69 billion pesos of losses to the economy.

Last month, the Center for Economic Studies on the Private Sector (CEESP) released a report highlighting that the informal market employs about 28 percent of the country.

The report criticized policies and laws passed in Mexico, saying they unwittingly fuel the informal economy. Higher taxes create an obstacle for many people and businesses, making illegal sales a lucrative and cheap alternative, the CEESP said, and an easier way to avoid paying taxes.

The CEESP estimated that the informal market represents 12.4 percent of the Gross Domestic Product.

In Mexico, it is illegal to create pirated goods or to sell them, but it is NOT illegal to buy them. Which means that most people are willing to buy anything they can get for cheap. And many Mexicans feel a duty to support their family, friends, or neighbors who work in the informal economy (in the U.S. we call it "working under the table" so that they can feed their kids. Less than 40% of Mexicans pay income taxes; most try to work "unreported" so that they can avoid the very very high taxes. This becomes a circular issue - when less people pay income and sales taxes, the government charges higher taxes on those who do, and bc the gov't charges such high taxes, no one wants to pay them, and bc so few Mexicans pay taxes, they can't provide the kinds of services - like unemployment or health care or education or fixing roads or arresting drug dealers - that they would like to do.