Smuggling threatens commerce and companies in São Paulo


São Paulo is today the largest market in the country for smugglers; Cigarettes lead the ranking of contraband and the leading brand of sales in the state is Eight, smuggled from Paraguay

São Paulo, June 1, 2016 - The Brazilian Institute of Competition Ethics (ETCO) and the National Forum Against Piracy and Illegality (FNCP), launch this Wednesday the State Coalition to Combat Smuggling, in partnership with the Brazilian Association of Bars and Restaurants (Abrasel) , the Brazilian Association of Gastronomy, Lodging and Tourism (Abresi), the Brazilian Association of the Bakery and Confectionery Industry (Abip), the National Tourism Confederation (CnTur), the Federation of Hotels, Restaurants, Bars and Similars of the State of São Paulo (Fhoresp), the Santo André Bakery and Confectionery Industry Union (Sipan), the São Paulo Bakers' Union and the São Paulo Bakery and Confectionery Industry Union (Sindipan).

During the conference for the presentation of the coalition, the presidents of the entities denounced a serious problem faced by several sectors of the São Paulo trade: cigarette smuggling is jeopardizing the survival of bars, restaurants and the like, which directly affects employment and the livelihood of nearly 2 million workers in these sectors. In São Paulo, which has become the champion state in sales of contraband cigarettes in the country, 41% of the cigarettes sold are smuggled. The leading sales brand in São Paulo, with a 25% market share, is Eight, manufactured in Paraguay.

The main cause of the problem of smuggling is the high tax burden on various products. A good example is the cigarette, one of the sectors with the highest tax burden in the country. Whenever the price of this product goes up, the population also suffers from the increase in crime, since the commercialization of these goods is done by gangs such as the First Comando da Capital in São Paulo and the Comando Vermelho in Rio de Janeiro.

FNCP President Edson Vismona reinforces the link between increased smuggling and high taxes. “The biggest advantage of smugglers over the national industry is the price. With a tax burden that already reaches 83% as in the tobacco sector, national manufacturers cannot compete with illegal brands, which are sold in Brazil for less than half the minimum price established by Brazilian legislation, ”he explains.

This also directly affects retailers such as bars, bakeries, among others. Unfair competition from cigarette smuggling can represent a fall that varies between 30% and 50% of the revenues of many of these establishments.

"We cannot ignore the fact that taxation on the sector currently leads about 50% of the bars to sell contraband cigarettes so as not to lose revenue with the drop in the sale of national brands, something we do not agree with". He explains that these establishments must be able to sell Brazilian products without having to resort to smuggling as a way to guarantee an important part of their income.

For many traders, this problem is even more serious. In underserved communities across the state, organized crime dominates the cigarette trade. In these locations, it is simply no longer possible to buy brands legally manufactured in Brazil as criminals impose the sale of smuggled products and assign quotas to traders, prohibiting the sale of national cigarettes.

The coalition intends to hold meetings with the main state secretaries involved in combating smuggling, and also wants to take Governor Geraldo Alckmin a manifesto with several proposals that can be adopted at the state level and which aims to reduce smuggling in São Paulo. Among the coalition's proposals are reinforcement of road inspection considered the main smuggling routes, the adoption of permanent operations to combat irregular trade in the cities of São Paulo and review of taxes applied to cigarettes to improve the competitiveness of national products against smuggled goods.

About ETCO - Public interest civil society organization that brings together companies and non-governmental business entities with the aim of promoting improvement in the business environment and encouraging actions that avoid competitive imbalances caused by tax evasion, informality, falsification and other misconduct.

About FNCP - Non-profit civil association formed in 2006 by sectorial corporate entities, companies and unions. It is the largest Brazilian association with an exclusive focus on combating illegality.

About Abrasel - Representative of the sector that currently has around one million companies, generating six million direct jobs across the country, which represents 2,7% of the Brazilian GDP. It has sections in 27 Brazilian states and 17 regional ones.

About Abresi - Non-profit civil entity that brings together companies and union and associative entities from the segments of Restaurants, Bars and Similar, Accommodation and Travel and Tourism, throughout the national territory.

About Abip - Civil society under private law that operates throughout the national territory, through unions, associations, regional coordinators and affiliated bakery institutes. The institution represents 64 thousand bakeries, 95% of which are micro and small family businesses.

About CnTur - Representative entity of the Tourism sector in Brazil, acts in the coordination and representation of the productive sector of Tourism in the country at national level, with public agencies and private organizations. It consists of 7 federations and 130 employers' unions.

About Fhoresp - Entity that represents 24 Regional unions in the State of São Paulo and that currently congregates 350.000 associates.

About Sipan - Non-profit entity, constituted for studies, coordination, protection and legal representation of the economic category of the Bakery and Confectionery Industrialists, based in the region of the great ABC.