By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Illegal outflows from Brazil for the past fifty years have sapped hundreds of billions of dollars from the Brazilian economy, says a new study released this week by Washington DC-based non-profit research company Global Financial Integrity (GFI). The report, which was funded by a grant from the Ford Foundation, is the fifth country case study released by GFI to date.

Brazil fraud, Rio de Janeiro, Brazil, Brazil news
Report finds billions are lost in Brazil due to illicit capital outflows, image recreation.

“Brazil has a very serious problem with illicit financial flows, and curtailing them should be a priority for whichever administration wins the forthcoming elections,” stated GFI President Raymond Baker in a press release announcing the release of the study.

According to Baker these outflows are draining billions of dollars each year from the official Brazilian economy – money that could otherwise be used to help the nation’s economic growth.

Brazil has the seventh largest economy by nominal GDP in the world, in 2013 it was an estimated US$2.533 trillion. Despite a roaring growth spurt in 2010, the economy has dropped into a recession in the first half of this year as GDP falls and investments drop sharply.

For Baker in addition to the direct loss to the economy, these illicit outflows are driving the underground economy, fueling crime and corruption, and costing the government significant revenue. The GFI study reports “more than US$400 billion flowed illegally out of Brazil between 1960 and 2012, draining domestic resources, driving the underground economy, exacerbating inequality, and facilitating crime and corruption”.

The sixty-page study, dubbed Brazil: Capital Flight, Illicit Flows, and Macroeconomic Crises, 1960-2012, headed by GFI’s Chief Economist, Dev Kar, estimates that annual average illicit outflows jumped from US$310 million in the 1960s to US$14.7 billion in the first decade of the 21st century and surged to close to US$33.7 billion from 2010 to 2012. “Unless corrective actions are taken, the economic toll of these illicit flows will continue to grow,” says the economist. According to Kar, Brazil’s illicit outflows, on average, are equivalent to 1.5 percent of the country’s GDP.

Port of Manaus, Brazil
Goods shipped out of ports such as this in Manaus are often accompanied by false trade invoices, with lower values so as to avoid paying Brazilian taxes, photo by H. Langos/Flickr Creative Commons License.

The losses, admit GFI executives, are probably higher than those found by the study, since the methodology used for the survey are conservative and do not include earnings from drug trafficking, human smuggling, and other criminal activities — which are often settled in cash as well financial transactions between subsidiaries of the same multinational corporations.

While global analyses find that trade misinvoicing constitutes roughly eighty percent of illicit flows worldwide the report shows that in Brazil fraudulent trade transactions is particularly serious, making up 92.7 percent of the country’s illicit outflows. “Trade misinvoicing is the dominant channel for illicitly moving money out of Brazil,” noted Kar.

The study also estimates that capital flight (both licit and illicit) totaled approximately US$590.2 billion during the 53-year time span, with 68 percent of the total capital flight being of illicit outflows. GFI recommends a number of steps the Brazilian government can take to help relieve the problem of illicit financial flows including “greater transparency in domestic and international financial transactions, and greater cooperation between governments to shut down the channels through which illicit money flows”.

“For many years we have observed reticence in Brazil to address problems of capital flight and illicit outflows,” stated Mr. Baker. “It is, however, a real and growing problem, as our research shows, and it merits serious attention by policymakers.”

GFI along with The Institute for Multidisciplinary Development and Strategy (MINDS) headquartered in Rio de Janeiro hosted a one-day conference this week in Rio to discuss the nature of Brazil’s illicit capital flows and why curtailing these transactions should be a priority for Brazil’s next administration.


  1. To what degree is the endemic corruption a symptom, rather than a cause of Brazil’s malaise? For example, in my opinion it is impossible to establish and run a successful business in Brazil if you adhere to all the rules, comply with all regulations and declare and pay all relevant taxes. By definition, therefore, all businesses in Brazil are corrupt in some form or other. This will not – cannot, if I am correct – change, unless the dysfunctional legal, financial, political and fiscal systems (at least) are fundamentally reformed. Be interested in other comments.

  2. You are essentially correct the Brazilians have mandatory elections yet they still elect unqualified individuals to important positions in government. In one case I know of a clown (by profession) was elected. Having no experience in government, financial matters, or even the slightest bit of knowledge of governing. In Brazil the suffocating bureaucracy is killing free enterprise The banking system is dysfunctional, Many Brazilians simply do not believe me when I tell them that going to a bank to conduct business should only take 10 minutes like it does in the US. That said the current national bank strike is a disgrace and is hurting the economy. These workers make double what the average Brazilian makes and they want 12% more in salary increases. The system as a whole is corrupt and broken, and will always be. There is no reason to fix it because the rich in Brazil use it to take advantage of the working people and this will not change because they are given a financial advantage by this corrupt system. They will not simply give up this advantage. The only way to truly fix it is to scrap the whole mess and start over. This is not likely to happen.


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