One of ETCO's founders, Victório de Marchi, Ambev's co-president, points out advances in the fight against unfair competition. Awareness is already high, but it is necessary to strictly punish tax evaders and advance inspection systems.

You actively participated in the process that gave rise to ETCO. How was the idea consolidated?

Victório: There was a group of sectors penalized by the high tax burden that had been suffering unfair competition from manufacturers who were evading taxes. With the price advantages generated by tax evasion, these companies were gaining sensitive market shares. If there was no reaction, in the long run the market share of companies that met their tax obligations would collapse. The problem affected several segments - especially beers, soft drinks, cigarettes and fuels - in different ways. In addition to tax evasion, there was the aspect of the low quality of some products, such as fuels, subject to adulteration. Or manufacturing processes outside the legal norms, as was the case with cigarettes, a smuggled product from several countries in South America, mainly from Paraguay. In one of the first meetings with representatives of the different sectors to discuss the problem, in 2001, we registered a growth in cigarette smuggling from 7% to 35% in the seven-year period.

Was there the idea for the Institute?

Victório: Our initial objective was to show the authorities and society, through data and studies, the losses of unfair competition. At meetings, I took all the data from the beer sector I had. Souza Cruz staff carried out studies on cigarettes. The representative of ABIR (Brazilian Association of the Soft Drink Industry) also participated, raising his concerns. I was inviting other people from companies like Kaiser, Coca-Cola. So, informally, we formed a group that would become the competitive ethics institute. Strictly speaking, ETCO arose from the union between Pepsi Cola, Coca Cola, Ambev, Kaiser and Sindicon. We immediately contacted an attorney to establish an appropriate legal framework. The suggestion was to establish a formal OSIP - Social Organization of Public Interest, as we still have today. We started to develop works demonstrating what is happening in the sector, electing 5 states that represented 80% of the movement of companies - São Paulo, Rio, Minas Gerais, Bahia and Rio Grande do Sul. We established contact with the Federal Revenue Service and started to act in those states. And we decided to hire an executive president.

3 years have passed since then. How do you evaluate the performance of ETCO and the panorama of the informality issue?

Victório: We have evolved above our expectations, raising the awareness of the authorities and society about the problem. The entity has gained credibility to the point of being recognized by the Federal Revenue and other tax authorities in all states, in addition to organizations such as the World Bank itself. We brought people who added value to ETCO, hired respected institutions and consultants for informality studies, such as Fundação Getúlio Vargas and McKinsey, and made the Institute a reference on the subject for the media due to the consistency of our information.

For the beer sector, was the main achievement the flow meter?

Victório: Even before ETCO, we already advocated the implementation of flow meters for simpler and more efficient control of production, as we saw in many other countries. In a totally computerized world like the current one, it is almost impossible to control a sector that issues 75 million invoices a year, such as beers and soft drinks, without an adequate instrument. In Germany, a major producer and consumer of beer, there is a flow meter that is nothing more than a water meter. You can cross-check information very simply. For example, for every 100 liters of beer, 10 kilos of ready malt are consumed. In soda it's the same, 80% is sugar. Crossing allows to know how much was purchased for each component, how much was produced, how much was sold, how many caps and how many labels were used. When we came up with the idea of ​​flow meters, there was little awareness of the benefits, but soon the IRS “bought” the idea. Our devices, instead of a hydrometer, are extremely sophisticated, fully computerized, "on line". It measures and identifies any type of liquid that passes through it, be it a tonic, guarana, coca-cola or a soda, because today there are equipment that allow this. Modulo, the company that developed the income tax system for the IRS, Cempra, which is the Research Center of the Ministry of Science and Technology, and Inmetro participated in the study and certification of the device, which must be implemented also in the mineral water, juice and isotonic industries, in addition to beer, since last year, and soft drinks, recently implemented. The beer sector grew 6% last year and the collection increased 16%.

Is it possible to implement it in the fuel sector?

Victorio: I don't see any difficulties. There is doubt about the possibility of fraud. But the equipment is a huge machine, the size of a room, which has a set of equipment underneath, all of them locked. When one of the gates is opened, the IRS finds out. Besides, it can't be stolen. Nobody carries such equipment on their backs.

For you, is informality a problem of inspection or awareness?

Victório: Both. It takes awareness that control measures are highly efficient due to psychological pressure. When the risk is greater, the irregularity is less. I see, for example, in companies. When there is a cash audit, everyone involved proceeds with greater attention just because they know that an auditor can arrive to check the situation. It must be shown that impunity is decreasing. We still have a lot of work to do to enforce the law. My proposal, in the case of flow meters, was for the government to establish an IPI credit for each company that installed it. In this way, the meter would belong to the government and if someone defrauded they would be committing a crime against the state. That gives chain. If someone makes a “cat” on the water meter in your house, you can be arrested. In the case of meters, our suggestion was that entrepreneurs be the “faithful depositary” of the equipment. This happens a lot in agriculture. The producer guarantees the bank a certain amount of rice bags for a loan. If, when the debt is over, there is no guaranteed rice, the farmer becomes an unfaithful depositary and goes to jail. In fact, there are only two things that end up in jail in the country: failing to pay a pension and not fulfilling the role of faithful depositary. We therefore wanted to punish the manufacturer for tampering with the product or for not paying the tax due. But the government did not agree with the idea.

The original detail was that the businessmen themselves were together with the government to defend the tax payment?

Victório: Perfectly. In the first meeting we had with the Federal Revenue Secretary, he used the same words. He said that he received us with great satisfaction because it was the first time that he received a group of businessmen who wanted to pay tax. And it was true. If the situation continued, in 10 years we would lose market share. In the case of a company like ours, publicly traded with shares registered in New York, losses to shareholders would take all of us to jail, in the first instance.

What, in your opinion, is ETCO's main work going forward?

Victório: We have a lot of ground ahead of us. Flow meters are having enormous effectiveness at the federal level, but we have to have the same performance in 27 states. That is, multiply work, choose priorities and make decisions. In addition, we need to encourage new enforcement legislation. And also promote the computerization of other controls, such as the electronic invoice system. We need smart control. In the case of beer and soft drinks, we have one million points of sale in Brazil. Who can control this? An army? No, just computers, only with income tax at source.