FAILEDMODEL
Luciano Stremel Barros, president of Idesf, maintains that, as a cheap product, which does not pay taxes nor does it have any social
function, the illicit cigarettes suffer no restrictions andenrichorganizedcrimegroups. Barroshas it that, inorder toconciliatea control pol-
icy on consumption, whilst preserving the tobacco supply chain, relevant to the economy of the Country, particularly in South Brazil, the
federal governmentmust understand that there is aneconomic logic incontrabandand that it isquiteeasy for it toenter theBrazilianmar-
ket, seeing that Paraguayproduces 55billioncigarettes ayear. “Thegovernment should rethink its tobaccocontrol plan, as it stands to rea-
son that thismodel has failed”, hewarns.
The president of the Idesf advocates the reduction of the tax burden on legal cigarettes, just like what happenedwith computer relat-
edproducts in early 2000, whichwould create a reverse flow, towards the formal trade, andwould eliminate, if not entirely, at least part of
thehugevolumeofillicitcigarettesoflowqualityinBrazil.“Byfightingtheconsumptionoftobaccoproductsthroughtaxhikes,thegovern-
ment is contributing towards the economic imbalance of the Country and promoting, indirectly, the illicit trade”, Barros argues.
COLLATERAL DAMAGES
The evaluation of the Institute of Economic Development and Social Frontiers (Idesf) considers that
the growth of the illicit cigarette trade generates collateral effects, like a set of social unrest situations:
from criminality to unemployment to school evasion in the border regions, including the costs generat-
ed by the contraband fighting operations and lawsuits. Not tomention the questions of public health, as
contraband cigarettes are not subject to quality control.
Contraband and falsified cigarettes – newmodel introduced by organized crime – also generate costs
that are not perceived by the public coffers. For example, there are 20,000 lawsuits filed against cigarette
smugglers in Brazil, at a cost of R$ 22 million for the public coffers. From 2008 to early 2017, there have
been 62 Federal Police Operations against contraband. Around 90% of the vehicles seized with contra-
band cigarettes had been stolen.
Surveys conductedby the Federal Universityof PontaGrossa (PR) concluded that 65%of the cigarette
brandssmuggledintoBrazilhaveahighcontentoftoxicelements,and81.2%ofthebrandsareladenwith
contaminants like fungi, insect fragments, grass andmites. 100%of the brands do not comply with phy-
tosanitary standards.
cigarettes that the government itself encourages
by action or omission.
Idesf officials argue that, if the product in-
creases in price while the income of the consum-
ers keeps stable or even falls, it sounds quite nat-
ural for them to shift to cheaper products. In the
case of cigarettes, the National Minimum Price
Policy does not allow to the market any legal cig-
arette brand below R$ 5, with retailers’ profits
reaching up to 8%, but smuggled cigarettes sell
for R$ 2.75 a packet, which generate profits of
up to 70% at the retail stores. Depending on the
source, the illicit product represents from 40% to
45.6% of the Brazilian market. Iro Schünke, pres-
ident of the Interstate Tobacco Industry Union
(SindiTabaco) has it that there is no doubt about
it, the illicit trade is now the biggest problem for
the Brazilian cigarettemarket.
Telmo Kirst, mayor of Santa Cruz do Sul (RS)
and president of the Association of Tobacco
Growing Municipalities (Amprotabaco), empha-
sizes that the entity has often presented impor-
tant arguments in Brasília, specifically to sever-
al ministries, on the impacts of contraband upon
the economy. In all, there are 574 municipalities
Argumentspresented
at astudystrengthen the
positionof the tobacco
that produce tobacco and the mayors are com-
mitted todefending theeconomyof thesemunic-
ipalities and, consequently the economy of the
Country. Our priority focus consists in requesting
the necessary measures that have to be taken by
the federal government relative to contraband”,
he emphasizes.
According to Kirst, more than R$ 5 billion a
year are barred from entering the public coffers
because of the illicit cigarette trade. More recent-
ly, jobs were lost because factories shut down
or had to reduce their work shifts. “So far, noth-
ing has been effectively done to put an end to
this situation”, says Kirst, mayor of amunicipality
that industrializes tobacco for the entire Country.
Though the ministry of justice, in the first half of
2017, announcedaNational Committee for Fight-
ing Contraband, no action with repercussions in
the sector has been put into practice so far.
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