Valor Econômico

Like millions of Spaniards, Alicia García is forced to make sacrifices to face the country's debt crisis. The 32-year-old beautician used to smoke a pack a day, but has now reduced it to just five cigarettes.

“Smoking just became too expensive,” says García, while smoking on a street in central Madrid. "I have to think twice before lighting."

Under pressure from a growing recession and increases in consumption taxes, the more than 10 million Spanish smokers have become perfect targets for cigarette smugglers. Illegal imports now represent between 7% and 8% of total cigarette sales, a year ago they were practically nonexistent, according to the association of tobacco companies in the country.

The number of packets of cigarettes sold in Spain fell 17% last year, according to the Tobacco Market Commission, which tracks only legitimate trade.

“Tobacco smuggling and counterfeiting, which had been eradicated since 1993, came back strongly last year,” says Jaime Gil-Robles, director of business affairs for Altadis, a local unit of the Imperial Tobacco Group, which dominates about 30% of the Spanish market, € 11,3 billion.

In just one week in January, Spanish authorities confiscated more than 1 million illegal packs of cigarettes, worth approximately € 4 million.

The problem is not unique to Spain. The French authorities confiscated 462 tonnes of products with smuggled or counterfeit tobacco in 2011 - 33% more than in 2010. Much of this was destined for the United Kingdom and Ireland, which have the highest tobacco consumption taxes in the European Union ( HUH). In Dublin, a pack of Marlboro costs € 9,10, compared to the price of € 6,20 in Paris.

"I've been working in this area for four years and the problem only makes it grow, grow, grow," says Ross Marié, who heads the unit in charge of combating illegal trade at British American Tobacco, maker of the Lucky Strike and Dunhill brands. Morgan Rees, director of regulatory communications at Philip Morris International, owner of the Marlboro brand, estimates that illegal sales dominate about 10% of the market in Europe.

While smuggling imports from China have stabilized, those from Russia and other Eastern European countries are on the rise, says Austin Rowan, head of the tobacco and counterfeit goods unit at the European Anti-Fraud Agency (Olaf), in Brussels.

"The deep economic crisis in certain markets, such as Lithuania, Latvia, Romania and Spain, has fueled the problem," he says.

Spain's unemployment rate, at 22,9%, is the highest in the EU. Also take into account the ban on smoking in public places in place since the beginning of the year and the tax increase of € 0,50 per pack and you have the “perfect storm”, says Imperial Tobacco’s chief executive, Alison Cooper . The multitudes of Spaniards smoking outside bars and restaurants are an easy market for street vendors of smuggled cigarettes, says Marcelino Gamez, president of Onae, a lobby group that represents some 2,5 companies in the tobacco industry. tobacco. A € 4,25 pack of Marlboro can be purchased for around € 2,25 in the parallel market.

It is not just cigarette manufacturers who lose. The illicit tobacco trade costs European governments about $ 10 billion in lost revenue, according to Olaf. In Spain, Altadis has defended a two-year freeze on tobacco tax increases, while Imperial's Cooper is hoping that the government will relax the smoking ban.

These are concessions that would enrage public health activists, such as Armando Peruga, manager of the Tobacco Free Initiative, of the World Health Organization (WHO). Peruga points out that Spain, along with Italy and Ireland, has been successful in using tax increases to decrease the number of smokers. "Tobacco companies want to scare the government with the scarecrow that, with the increases, it loses money in tobacco taxes", he says. “This is a fallacy. When smoking is banned in public spaces, the only power that companies have is to reduce prices, [power] that they lose when the government raises taxes. ”