Free Smuggling

By Evandro Guimarães, CEO of ETCO and Edson Vismona, President of FNCP

There are situations in which the Brazilian government seems to be an ally of smuggling and embezzlement. The lack of governmental action to effectively combat this crime, which has harmful effects on the Brazilian economy, is certainly the main competitive advantage that criminals have over the national industry. Feeling free to act, smugglers are advancing in sectors that simply are not able to compete against those who do not collect a penny of tax, do not employ any Brazilian worker and do not follow the safety and health standards required in the country.

Created in the second half of 2014 by the Instituto de Ética Concorrencial (Etco) and the National Forum Against Piracy and Illegality (FNCP), with more than 70 entities representing sectors affected by illegality in Brazil, the Movement in Defense of the Brazilian Legal Market it aims to combat various forms of illegalities that have been harming the national industry, including smuggling and embezzlement.

Throughout this period, we hold events, produce studies and hold meetings with various authorities involved directly and indirectly in the fight against smuggling. More than that, numerous proposals were put forward that could have been adopted by the government, and that would certainly have an extremely positive impact on the problem. The fight against smuggling could be adopted, for example, as one of the efficient ways to increase government revenue without, however, further penalizing the productive sector through new and higher taxes.

Although we were received in all spheres involved and, most importantly, recognized by everyone within the government, the seriousness, extent and effects of smuggling for the country and the population, nothing has progressed. On the contrary, cuts in the payment of per diems and investments have dismantled border control initiatives by federal agencies (IRS, Federal Police and Federal Highway). This is a perverse equation: taxes are raised and investments are cut.

In view of this sad scenario, it is possible to intuit that the Brazilian government grants great space for the action of Paraguayan smugglers. To reach this conclusion, just analyze some data: only in 2015, contraband and embezzlement caused losses of R $ 115 billion to the country, 15% more than in the previous year, a figure that includes the losses of the national industry, taxes that are no longer collected, without calculating public health and safety expenses, among others.

Several sectors are severely affected by smuggling in Brazil, such as clothing, medicines and toys. But the sector that suffers most is certainly tobacco. In 2015, about 30% of the national cigarette market was dominated by smuggled brands from Paraguay, a country that currently produces 10 times more cigarettes than it has the capacity to consume. Of the 10 best-selling brands in the country, two are manufactured in the neighboring country and cross borders illegally, accounting for 13,4% of all national consumption, more than the best-selling brand.

Only this sector recorded tax evasion of about R $ 4,9 billion in 2015, or R $ 15 billion in the accumulated for the last five years, money subtracted from the government and which could become hospitals, highways, schools and other benefits for the population. population. The lack of governmental action raises important questions. Would it be absurd to neglect contraband the reason for this immobility? It is inexplicable that, faced with reality, the authorities have remained passive in relation to a devastating scenario for the national economy. The constant search for greater collection, both at the federal and state levels, creates an unsustainable situation, in which the economic attractiveness of the smuggling and illegality increases day after day. Stimulated by high profit margins and low risk, smugglers occupy the space of companies legally constituted in Brazil, without any kind of constraint by the authorities.

On this March 3rd, on which we hold the National Day to Combat Smuggling, we make an appeal. We want a legal Brazil, free of contraband, with a strong industry, generating jobs, paying bearable taxes and always contributing to the development of an increasingly developed society. But for that, we need attitude and leadership from the Brazilian government.

Article published in the Correio Braziliense newspaper, 03/03/2016