André Franco Montoro Filho: Far beyond inspecting borders
Author: André Franco Montoro Filho
Source: Folha de S. Paulo - 20/07/2010
In Brazil, the seizure of smuggled goods has increased sharply.
Balance released by the Border Operations Department of the Ministry of Justice and Public Security of Mato Grosso do Sul shows this growth. According to its commander, Colonel Joel Martins dos Santos, "the number of occurrences that has been increasing considerably is the smuggling of cigarettes and, as a novelty, that of new and semi-new tires".
Of equal content are the reports from the Federal Police and the Federal Revenue in which increasing seizures of drugs, such as cocaine, hashish and crack, and weapons and ammunition, are reported. These reports inform that most of these goods enter Brazil through Paraguay, even if they have not been produced there, and through Bolivia.
As these crimes represent a risk to society, they must be treated as a priority topic on the public agenda.
For example, in the cigarette industry, market research (2009) points out that 30% of sales are from illegal cigarettes (35 billion). Much of it comes from Paraguay, which produces about 40 billion units, a volume well above domestic demand, of 3 billion. The surplus is diverted to Brazil and other South American countries.
The biggest stimulus to this illegal trade is the significant difference in the cigarette tax burden. While in Brazil this load is approximately 63%, in Paraguay it is less than 10%.
This tax disparity generates huge price distortions. While the average price of a brand of lesser value in Brazil is R $ 3, the average price of smuggled products is 50% lower.
It is important to note that illegally low prices facilitate access for young people and the less favored income classes to the product, going in the opposite direction to the Ministry of Health's public policies to discourage cigarette consumption.
Consumers, in turn, are exposed to products of dubious quality and origin, which do not even have registration with the regulatory agency (Anvisa) and are not within the standards of controls required and provided for in the legislation in force.
The work of the Brazilian authorities in the fight against smuggling is worthy of recognition. However, our legislation provides for low penalties for these crimes, which causes the punitive character to lose its effectiveness and the people involved to remain free and practicing the same crime.
The problem of smuggling is not a trivial solution. It requires a joint and permanent effort by all authorities to combat this crime. Investments are essential, especially in the area of intelligence, because only with a better understanding of how the gangs are organized will it be possible to dismantle this parallel industry. Equally relevant is the application of stricter penalties for such crimes.
Finally, the demand for the construction of bilateral agendas between the governments of Brazil with Paraguay and Bolivia is becoming more urgent every day. The profitability of these illegal activities is much greater than the return from legal activities, making repression of illegality difficult both economically and politically.
The Brazilian government can and should contribute to the research and development of profitable economic options that can enable the transfer of illegal activities to legal activities and the consequent discouragement to the smuggling industry. With that, we would all win: Brazilians, Paraguayans and Bolivians.
André Franco Montoro Filho, doctor of economics from Yale University (USA), is a professor at FEA-USP and president of the Brazilian Institute of Ethics in Competition - ETCO. He was secretary of Economy and Planning of the State of São Paulo (Mário Covas government) and president of BNDES (1985 to 1988).
