The phenomenon of informality is encysted in a number of areas of the Colombian life.

According to experts, behind its several manifestations there are economic incentives which are an invitation to break the law, including the lack of controls to discourage informality and the complexity of the forms to relate with the state, which make it rather difficult for those who actually want to comply. Read: ‘youth employment informality in the country is among the highest’: ILO)

A third part of urban transport is offered outside the law; pedestrians are given flyers that offer credits outside the formal system or saving schemes with miraculous results, and workers from different trades who are not within the social security system, crowd together in corners offering services.

In the suburbs of these cities, on their borders, settlements with no previous procedures or requisites flourish, with informal connections that cost energy suppliers half a billion COP a year.

Citizens who own this houses are owners, but have no means to prove their ownership. And if they are independent workers, they have no way to justify the income they make.

Showing you have properties or an income is the guarantee a bank demands when asking for a loan. For this reason, lots of people cannot aspire to get a credit from an entity of the financial system and therefore are willing to huge interest rates to usurers.

Many employees are under similar conditions than independent workers, as a large number of them work under informal conditions. Companies have little incentives to comply with the law. Keeping workers under informality may represent a 40% advantage on workforce costs.

Informality is also rather notorious in taxes and many businesses remain invisible under the eyes of tax-collecting entities. Consequently, the local tax collection entity sees only 67 COP out every 100 COP that different businesses across the country move.

In addition, there are services and products for which the business makes a bill, but ends up paying no taxes, as there are companies that produce loses in the year, or at least that is how they declare it. As a result, only one out of ten businesses pay profit taxes.

Informality directly strickes the State’s finances and it is as evident in social security as in taxes.

Even though that in Colombia there are over 20 million people working, only 10 million contribute to the health system.

This means that from over 44 million people enrolled in the health care system (workers and beneficiaries), 23 million are in the subsidised regime and their health is financed with the contributions that, on principle, are only for the rest.

Meanwhile, among the 20 million of workers enrolled to the pension system, 9.6 million do not contribute on a regular basis and they will most likely not be beneficiaries of a pension when they come of age to retire.

Making the labour more dynamic and modern by providing different options of formality is one of the keys to attack the problem. Intensifying controls to ensure compliment is another way.