Hoche Pulcherio, president of the Brazilian Association of the Soft Drink Industry, says that tax evasion has decreased in the last three years, but the sector's high tax burden still favors informality.

What is the panorama of the soft drink industry with regard to unfair competition?

Hoche: The big problem in the sector is tax evasion. And it reaches companies of all sizes, small, medium and large. At all levels, there is a level of unfair competition and informality. We recently had a meeting to discuss the views of regional and national producers. Our association was accused of having implemented the flow meter requirement and thus harming small producers. But in fact, regardless of the size of the company, there are many people trying to print the flag of ethics in competition. There are two or three niche markets that compete with each other. At level one you have the same problems as at level two, in different proportions. But there are always a lot of people in legality and another outside it. Some kind of unfair competition. And the awareness of the problem and the search for solutions is great news.

Will the flow meter help with inspection?

Hoche: ABIR, together with ETCO, really suggested to the federal government the implementation of the flow meter in the industries. Revenue exempts the meter for producers of less than five million liters per year or billing less than two million reais per year. I always say that tax evasion forms like a spiral. There is a formal market where everyone pays the tax. Then a new actor enters the scene willing to evade to compete with lower prices. If the tax due was 40%, it pays only 35% and passes the 5% to the consumer in the form of prices in the form of better prices. The other actors perceive the situation and start to evade 6%, which are also passed on to the consumer. Two markets are quickly formed. One that pays tax and the other, below, that deteriorates with more and more tax evasion. It is actually a trap. People are more aware of this, which to me is a credit to ETCO.

What was the gain for the soft drink area in these three years of ETCO?

Hoche: We had, in practical terms, a 20% reduction in tax evasion. There has been an undeniable price recovery for companies after many years. Obviously, we had an impact on investment plans and employment, which have not yet been fully measured. However, we continue to live with the high tax burden for the segment, of 38%. In any case, public awareness of the harmful effects of informality is the greatest victory. Informality and illegality are almost the same. What changed was the acceptance by society. People are no longer accepting informality and ETCO is playing a key role in this perception. Ethics is at the center of all discussions. Veja magazine recently had some 40 questions about ethics, even driven by scandals that have been happening in the political field. The breach of the secrecy of caretaker Francenildo, for example, had an immense repercussion because people are more aware and sensitive to ethical issues.

How will the issue of ANVISA's regulation on segment advertising affect the market in terms of competition?

Hoche: The regulation of what can or cannot be announced has a very large potential impact. Not only in Brazil, but worldwide, there is a great paranoia about obesity, classified as one of the effects of soft drink consumption. I recently discussed with the ANVISA staff some mistakes in this attempt to regulate. There is no way to simply cut some products off the Brazilian menu. Sugar, soft drinks, candies, chocolates. Do they get fat? Perhaps, but people cannot be deprived of eating them sparingly or even without it. I even quoted the Bible that says "man does not live by bread alone". I asked what else they wanted to ban. The goal is to indicate three pills a day for each citizen? It is a wrong solution. The issue is people's awareness of the need for a balanced routine. In addition, there are other problems with regulation. There are articles as weird as one telling you not to show soda below 1,20 in height. The big chains - Carrefour, Pão de Açúcar - will respect it. But will Mr. Manuel from the corner bakery also go? We run the risk of adding distortions to the market, instead of correcting them.