Marcelo Rehder, The State of São Paulo - 14/03/2005

The country lost 5 jobs and failed to collect more than R $ 750 million in taxes withheld only with fraudulent under-invoicing operations in importing toys in 2004. The estimate is from the Brazilian Association of Toy Manufacturers (Abrinq), which is working with the IRS to curb this.
It is an illegal practice that is characterized by the import documentation at prices lower than those actually made, reducing the tax calculation base due. The difference is paid on the outside, but the toys reach the Brazilian consumer at artificially low prices, due to tax evasion, constituting a clear unfair competition.

The damage caused by the scheme came to light last month, with the disclosure of the financial problems faced by Estrela, the largest toy manufacturer in the country, which went on to have the bankruptcy required by suppliers. According to Abrinq, there are at least 35 more companies in a similar situation, which could explode at any time.

The entity suspects 84 importers, among which are large retail chains and supermarkets, responsible for 52% of the volume, by weight, of Brazilian imports of toys, but representing only 19% of the value of these operations.

“Rua 25 de Março caused less problems for the Brazilian industry in 2004 than many so-called serious importers”, says Synésio Batista da Costa, president of Abrinq, referring to the largest street trading point in the city of São Paulo. "The magazines pay importers in cash, but require 90 days' worth of products and consignment products from the national industry", he argues.

Many companies are going into the red because of reduced sales and increased inventory at factories, which reduces working capital. Estrela, for example, started the year with R $ 35 million in toys stranded in inventory, according to the Toy Industry Workers Union of the State of São Paulo. “This is not an isolated case. Most manufacturers have been laying off workers to reduce costs, ”says the entity's president, Maria Auxiliadora dos Santos.

Last year, more than 1,2 layoffs of employees with more than one year of service in a company were approved at the category union in São Paulo. “It was one of the worst years since the opening of the market to imports, in 1990”, says the unionist.

Machine regulator Marcelo Ferreira da Silva, 32, felt it on his skin. In January, on his return from vacation, Silva was fired by Brinquedos Bandeirante, after 8 years of service. He integrated a list of 40 people dismissed by the company in the same day. "They claimed that we were not being fired for incompetence, but because of a restructuring to reduce costs," he says. Silva is unemployed and works to keep his family, assisted by his wife, Valquíria, a freelance seller of cosmetics and women's clothing.

For the president of Abrinq, the signs of under-invoicing are evident: while in the international market the average price per kilo of imported toys is around US $ 10, in Brazil it dropped to US $ 3,40 in 2004. Worse: reports from the Ministry of Development itself report that, in some customs, this average was below US $ 0,50.

At the São Francisco do Sul (SC) customs office, the IRS withheld for underfilling investigation a load of 4 containers of friction carts imported at US $ 0,48 per kilo (or US $ 0,08 per unit). At the Port of Paranaguá (PR), a load of 40 containers of imported stuffed animals is also held at US $ 0,21 per unit.

To circumvent the revenue blitz, bad importers usually migrate from port to port. Costa says that in July 2004, after a large operation in Foz do Iguaçu, in which 30 carts of smuggled Chinese products were apprehended, the importation by the place, which represented about 20% of the products that entered the country, fell suddenly to 6,8%. At the same time, imports via the Port of Itajaí (SC) grew from 3,8% to almost 8%.

Last year, toy imports reached US $ 63,5 million, up 97% over 2003, when they totaled US $ 32,2 million. “Without under-invoicing, it would be $ 190 million; the government would raise more and the Brazilian industry would have the necessary competitiveness to maintain the thousands of jobs that are swept every year ”, says Costa. Abrinq's figures indicate that imports already represent about 35% of the toys sold in the country. According to the organization, for every US $ 35 thousand imported, a place in the Brazilian industry closes. The sector employs 21 people, 5 less than a year ago. In 2004, the manufacturers' market was equivalent to US $ 650 million. In reais, the companies' turnover fell by 6,5%, after discounting inflation for the period.

"The speed and attack volume of the so-called 'importabando' were violent in 2004. If nothing is done, many companies will go into insolvency this year, closing more jobs," argues Costa.