According to a report from the Uruguayan newspaper “El País”, behind the percentages published by ILO there are stories and behaviours that explain informality.  

Argentina seems to be the country of regulatory ambiguity.

While taxes go up, sales go down and some middle class merchants, sons of merchants and employers who are compliant, consider themselves survivors. The problem is that they do not know how much longer they will be able to hold on. Other merchants, sole proprietors, have started abandoning the legal game: they close their shops, rent an apartment and conduct their business beyond formal economy.

It is a scheme where those who do things right are not usually compensated, where bureaucratic difficulties and taxing pressures seem to “entice” people into leaving legal structures and most Argentinians end up taking part of it.

The fact that, according to the International Labour Organization (ILO), in Argentina 46,8% of workers perform under informal conditions, is barely the tip of the iceberg. Economic informality, both natural and endemic, causes a lack of taxes, a lack of social protection and an absence of proper information needed to create public policies. But, the most important thing is that it shows how the State and its relationships with citizenship, are thought; it is closely linked to a patronage system and sets a vague borderline between what is legal and what is not.

“As Argentinians, we are ambiguous towards rules and the State has encouraged such ambiguity: there is a lack of cultural consciousness about the fact that we live in a system that requires certain agreements in order to function – says Pablo Wright, anthropologist and researcher from Conicet (National Council of Scientific Research)-.”

According to Wright, the closest thing to the Argentinian founding myth is the practice of contraband, back in the times of the viceroyalty. “The ad hoc contraband system: that is where the Argentinian constitutive ambiguity comes from”, summarizes the anthropologist.

Luis García Fanlo, a sociologist and researcher from the Gino Germani Institute of the University of Buenos Aires, links the lack of trust towards what comes from the State and the reluctance of tax payment  to the old “caudillo” axiom: no one is better than no one. “An equalitarian, individualistic and plebeian culture that distrusts both the State and civilian institutions, in two different ways. On the one hand, it considers these are institutions with a superior power, with a social logic that is antagonistic to individual interests. On the other hand, individuals feel they can demand to these institutions, as they have the obligation of satisfying needs and acting as providers.”

The sociologist thinks that since the middle of the century XX, with the appearance of the Peronism, the cultural model mentioned, turned into a dynamic where demands may only be satisfied if there is enough power to generate pressure.

“It is a national ethos, as it is transversal to every social class and it is used by the State and governments to administrate demands into clientelism devices”, he concludes.

Such configuration has also been supported by the progressive decline of public, universal and quality policies, claims Jorge Ossono, historian and researcher. Ossona states there is an informal economy that is strategically cultivated during inter-electoral periods. This enables the creation of fraudulent taxi or bus agencies that provide transport to voters. “It is a particular relationship with the State that responds to implicit, consolidated and informal rules”, points out the researcher.

These dynamics have little to do with the idea of social life as a system of agreements, or with the fact that no State can exist without taxes. Furthermore, it even goes against such notions. “Informality lowers tax income and public services’ financing possibilities. It also reduces the impact of labour policies, threatens an ample social security system and creates all kinds of economic distortions and inefficiencies- explains Leonardo Gasparini, economist and Director of Cedlas (Center of Distributive, Labour and Social Studies)-, but we must take into account that it is generally the result of a socioeconomic situation, and only partially also a cause. If the Government managed to abruptly eliminate informality, without applying any other changes, probably large sectors of the economy would not function anymore, and the impact on poor workers would be negative.”

Due to the complexity and the intervention of several economic, political and cultural variables, it is a phenomenon hard to grasp. How can we come to understand situations as diverse as the person working at a clandestine workshop, the person who adapts his home in order to open a shop, the self-employed professional who barely manages to cover his expenses or the owner of a company who does not formalize his entire staff? If we add to this the lack of transparency within the State, the scenery becomes even more complex. “The first step to create a policy that reduces informality is to make a diagnosis” states Nadin Argañaraz, economist and research director of the Argentinian Institute of Fiscal Analysis (Iaraf). “The State should deliver a periodic measurement, an in depth-analysis of the informal economy. However, this kind of research is very expensive. If we want data that truly helps, a very detailed and extended study should be conducted on a national level.”

As regards the labour world, sociologist Diego Masello, who coordinates the Research Department of the National University of Tres de Febrero, has been developing a study that aims to make the scenery more clear. He establishes a difference between two active labour worlds that exist in Argentina: the “modern sector”, which is formed by companies of high productivity, with good wages, use of technology and medium or large establishments; and the “structural informality sector”, characterized by low productivity jobs, lack of security and capital investment, self-employment and a frequent confusion between labour and domestic spaces (the workshop or shop created inside the house). Despite the fact that there are common lines between these worlds, the undeclared work phenomenon is very different in each of them. “Not every informal job is the result of the same causes. Therefore, not every informal job can be mitigated with the same public policies”, explains Masello. “We must understand that structural informal employment has to do with subsistence economies.” In other words, people “invent” a job, barely have any resources or training, are under no unions and have no real possibilities of growth. Many of them come from the “modern sector”, have lost their jobs and survive on these precarious modes. Beyond these modes, there is plain and simple exclusion.

Patricia Beatriz Vargas, anthropologist and researcher from IDES (Institute of Economic and Social Development), worked together with certain who live in this universe that swings between atomization and networks of trust linked to group loyalty: the several sewing workshops that remain under informality, though they are not part of slavery textile work. “Many of these workshops employ undocumented foreigners who prefer not to legalize their situation because they believe the contact with the State is too complex and intimidating. They use networks of trust, instead of networks of formality”, she explains. Vargas also studied the experience of self-employed designers and entrepreneurs, who also find it hard to go legal: “They have difficulties expanding or obtaining bank loans”, she explains; She also points out a “major contradiction”: these professionals, trained in entrepreneurial knowledge are never educated on notions related to accountancy or administration.

As we consider all these perspectives, we come to the conclusion that, despite the creation over the past few years of active policies to fight informality, a large number of aspects and different economic realities are not being fully contemplated by the State’s administration.

The result, at least from the perspective of contributors, is a tax unbalance and a growing tax pressure on those who are compliant. “Argentina has a very high tax load, close to 50% of the added value, so there is a high incentive to evade –says Argarañaz-. If informality does not go down, the solution –applied by every government- is to increase taxes. I call it to hunt in the zoo: the government goes after what it is easier to collect”.

Usually, disloyal competition affects those who are not exactly at the top of economic success: the small merchant who pays self-employment taxes, as well as municipal and provincial taxes, is not responsible for understanding what is going on underneath the social collapse of the street vendor who settles a few meters away; actually, the political administration is responsible for avoiding the frequent disputes between those who still have some resources to struggle for their social position and those who see themselves in freefall.

Source: Newspaper El País de Montevideo, Uruguay.