Secret Commerce Behind the Door

It’s a sleepy street in Rio’s Flamengo district, where the only thing notable to the casual passer-by is the graceful art deco foyers of the aging apartment houses.

There’s certainly no hint of the beehive of clandestine activities at No. 41. But beyond the marble-floored hallway, many apartments are doing double duty as unregistered fix-it shops, retail outlets and beauty salons whose middle-class proprietors are eking out livings in Brazil’s so-called “informal” economy.

“You wouldn’t believe what goes on behind people’s doors,” says the cheerfully indiscreet doorman, Joao Dias. “We’ve got a hairdresser, a takeout meal service, two clothes makers, a manicurist, a natural-products saleswoman and a coconut vendor.”

And that’s not counting more personal services, Dias adds.

Recession and rising unemployment have swelled the ranks of the underground economy, a huge but shadowy sector that dodges taxes and defies measuring. With the government predicting zero growth at best for this year, more and more Brazilians are turning to that fringe to survive.

The government-run Brazilian Institute for Geography and Statistics took a stab at mapping the informal economy in 1997.

In its recently published findings, the agency said that at that time one in four of Brazil’s 52 million economically active people were in the informal economy. Of those, 55 percent worked at home or at their clients’ homes.

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Among them is Cremilda Alves Araujo. Each morning, she turns her small fourth-floor apartment at No. 41 into a smart, fully equipped hairdressing salon with washbasin, hair dryer, mirror, swivel chair and array of hair-care products.

While advertising is usually one of the keys to a successful business, it would be fatal for Araujo’s shop, and she relies on word-of-mouth to attract customers.

“My work is prohibited because I am not registered,” Araujo says while massaging conditioner into a client’s hair. “But these days you can’t wait for a job to come; you have to go and set one up yourself.”

Her customer, Iolanda Gomes Montezuna, is a neighbor from the third floor. She is paying the equivalent of $34 for a special treatment, but a simple wash-and-cut is only about $8.50. The prices are slightly lower than at professional salons nearby, and Araujo will get as many as 10 customers in a day.

The state statistics agency says the informal economy grew 5.2 percent between 1990 and 1997, a time when the formal sector contracted 0.4 percent.

“It’s a result of bigger firms using more machinery and fewer workers,” says Angela Jorge, head of the agency’s department of employment and income. “The excess workers are absorbed into smaller endeavors.”

The official unemployment rate is around 8%, but many economists say the actual figure is much higher because the government counts part-time and informal-sector workers in its figures.

President Fernando Henrique Cardoso admits that Brazil’s big battle is to create jobs.

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Fernando Damasco agrees. With his girlfriend, Daise de Oliveira, Damasco runs a takeout meal service from his first-floor flat at No. 41, only because he couldn’t find enough work in his field as a translator.

“If I did only that I wouldn’t have enough to live on,” Damasco says. “Many of my friends are in the same situation, working as street vendors.”

His one-room apartment also serves as a kitchen and office, equipped with computer, stove and microwave oven and staffed by two employees. Damasco and Oliveira oversee the delivery of about 50 meals a day, mostly in the neighborhood, and until recently were making a profit of $2,250 a month.

But then their operation was caught by an employment inspector and, to escape a fine, they had to register the business. After paying social security and other taxes, their profits were cut in half.

Although tax inspectors are the terror of the informal entrepreneurs, the complicity of neighbors helps most escape detection.

After all, says Dias, the doorman, having all those businesses at your doorstep is rather like living in a department store.

Dias is interrupted by a woman who asks where she can buy some herbal shampoo. Eighth floor, he says.