Source: Gazeta do Povo Online

Cigarette production in Paraguay has doubled in the past seven years. It went from 30 to 60 billion units. Increasing smuggling - mainly to Brazil - is the central fuel for this expansion. Altogether, 70% of all cigarettes produced in the neighboring country are absorbed by Brazilian borders, according to the Brazilian Association to Combat Counterfeiting (ABCF). With a population of 6 million, Paraguay consumes only 3 million units of the cigarette it manufactures.

Currently, 63 Paraguayan companies manufacture cigarettes - even more harmful to health than similar Brazilians. The number of factories has hardly changed in recent years, but their structure has been looming. Former manufacturers now occupy spaces corresponding to a block and only one of them employs around 600 people. “What used to be in the hands of adventurers today operates in large groups”, summarizes Luciano Stremel, ABCF representative.

Some of the tabacaleras, as the factories are known, are the result of the society between Brazilians and Paraguayans. It is estimated that companies legally export 4 billion cigarettes. The rest - a total of 56 billion units - are smuggled into Mercosur countries.

Brazil concentrates 30% of the sector's sales, that is, 35 billion units are of illegal cigarettes. The difference in the tax burden practiced in the countries is identified as the biggest driver of illegality. Taxes on the value of the product in Brazil reach 63%, while they are no more than 10% in Paraguay. More than R $ 2 billion are not collected every year in Brazil because of smuggling and embezzlement. The pack of cigarettes that costs R $ 1,50 in Paraguay is sold for R $ 3,40 in Brazil. Packages are sold freely at street stalls and small bars.

Informality

For the executive president of the Brazilian Institute of Ethics in Competition (ETCO), Roberto Abdenur, the high tax burden in a segment contaminated by the illegal market is a fuel for increasing informality and, consequently, tax evasion. He also criticizes competition from companies that turn to the courts and installments for not paying due taxes. “Only a portion of the manufacturers punctually collect all the taxes due. The damage to the formal market is having to face unfair competition from manufacturers that do not comply with the legislation and also from the large volume of illegal products coming mainly from Paraguay ”, he says.

"Crime is a business that is always based on the highest possible profit and the lowest risk", says the head of the Crime Fighting Division of the Federal Highway Police (PRF), Moisés Dionísio. He estimates that a gang makes a profit with only one success out of every five smuggling attempts. In other words, a cart with illegal shipments of cigarettes that reaches its final destination means profit for smugglers even though four others have been intercepted by inspectors and police. Each cart carries an average of 500 cigarette cases.