Source: Jornal do Commercio Brasil - RJ, 07/04/2009

The increase in the rate of the Tax on Industrialized Products (IPI) on cigarettes will favor the growth of illegality, said the president of Souza Cruz, Dante Letti. The executive did not criticize the government's decision, which will result in an increase of between 20% and 25% in the value of the pack of cigarettes, but defended that the inspection be stronger to inhibit the action of smugglers.

“I understand that some sectors of the economy have done better than others, that the government has resorted to raising taxes in some sectors, to convert into aid for others that are not doing so well. We just hope that our sector is not the only one to pay the bill. Our part of the contribution is done, but there is a risk. For the collection to continue growing, the government must act strongly in the fight against illegality, contraband and tax evasion ”, said Letti.

According to the executive, some actions taken by Souza Cruz last year, such as investment in logistics and products with high added value, may be the company's differential to face the international turbulent scenario.

“Over the past year, already understanding that there was a prospect of change in the international scenario and resulting from crisis contamination for Brazil, we made strong investments in premium brands and improved distribution. This homework done in 2008 puts us in a very competitive situation in 2009. A large part of the investments have already been made and our portfolio is better prepared to face the crisis ”, he commented.

The president of Souza Cruz also added that investments in premium brands will continue to be made this year, as, in the company's conception, consumers in this segment are less susceptible to falling income.

Souza Cruz's market share, according to Dante Letti, is 62% of total consumption in Brazil. Despite the large share, the company is concerned, since the illegal trade corresponds to about 30% of the market.

“For us, the balance between the growth of market share and the increase in profitability is interesting. These factors have to go together. We are not going to sacrifice our profitability due to growth in participation only. ”

collaboration with governments. The company, said the executive, works in conjunction with various levels of government through suggestions to combat illegal sales in the sector. According to Letti, police action and initiatives are the responsibility of the government and Souza Cruz contributes only with ideas.

“We have seen an increase in the level of contraband in recent months. We are worried. If the authorities, especially the Federal Police, the Federal Revenue Service and the governments of the states, do not unite in the control of smuggling and borders, we can see a big increase in this type of crime ”, said the executive.

The outlook for 2009 is a difficult economic scenario, in which unemployment tends to increase. In Letti's assessment, the various initiatives taken by the government have managed to give a consistent direction to alleviate the effects of the crisis and resume growth by the end of the year.

“We are in a difficult context. Workers are losing their jobs and family income is declining. At the same time, there is an increase in prices. Our sector must be affected. Our consumption reduction expectation is around 6% or 7%. Perhaps in 2009 sales the impact will be less, as the increase will only start to take effect in April, but it will be a significant reduction in our sales level ”, said the executive.