Illegal market is one of the main global risks of 2018, according to report released in Davos

Study released by the World Economic Forum analyzes risks in five dimensions

The illegal market, made up of smuggling, piracy and counterfeiting of products, is one of the main global economic risks for the year 2018. This is the conclusion of the study “The Landscape of Global Risks 2018”, prepared annually by the world Economic Forum.

According to the material, “global risks” are uncertain events or conditions that, if they occur, can cause significant negative impacts in several countries or industries in the next 10 years.

The report is drawn up from various sources of official and unofficial data from all countries, in addition to studies of trends from international organizations such as the UN and its various agencies; the World Banks (IBRD), the Inter-American Development Bank (IDB), the IMF and others.

By analyzing the data, the experts at the Forum are able to assess the probability of occurrence and the impacts that these risks can offer if they occur and what this means in terms of local societies, countries, regions, continents. With that, it is possible to develop global strategies to face the challenges that affect different countries and regions.

Brazilian reality

Currently, the illegal market has reached unprecedented levels in the Brazilian economy. The various types of trade diversion represent huge financial losses for the country. To have an idea of ​​the size of the problem, between 2015 and 2017 Brazil lost R $ 345 billion to the crime of smuggling alone. This estimate points to losses in the productive sector added to taxes that were no longer collected in the period.

Among the sectors most affected by the illegal trade in products are clothing, medicine, electronics and auto parts. But the champion of illegality is the cigarette. In 2017 Brazil became the largest global market for illegal cigarettes: 48% of the brands sold in the country were illegal, with the vast majority smuggled from Paraguay.

In the case of cigarettes, the financial losses that this trade brings to the country are enormous. Since 2011, tax evasion caused by smuggling has totaled R $ 23 billion. In addition, it is necessary to take into account the existence of companies that operate in Brazil in an irregular way, the so-called 'persistent debtors'. According to the National Treasury, 13 industries have been closed in recent years for not paying taxes repeatedly. And data from the IRS show that only one of these companies owes more than R $ 4 billion in taxes to the tax authorities

It is also possible to highlight the connection between smuggling and criminal factions such as the First Command of the Capital and the Red Command. Drug trafficking - the most well-known and feared face of factions - mixes with smuggling, piracy, counterfeiting, arms and ammunition trafficking and fuels corruption, generating huge profits.

“The illegal market is today one of the main sources of financing for organized crime in the country,” says Edson Vismona, president of the Brazilian Institute of Ethics in Competition (ETCO). "The violence that Brazilians face every day in Brazilian cities has, in many cases, originated in this crime" he says. For him, the solution to the problem is the integration of public administration efforts with the support of civil society.

Source: JB Online (19/02/2018)

Smuggling does not respect borders and affects up to 2% of LA's GDP

Edson Vismona (*)

Illicit trade directly affects tax collection, public policy development, consumer health and job creation. However, the situation is even more serious, since we are also dealing with national security, since organized crime, which feeds on smuggling, is dominating the border regions of Brazil and other countries in Latin America.

As such, smuggling is no longer just a local concern and has taken on a regional-continental dimension. It is estimated that each year Latin America loses between 0,9% and 2% of its GDP due to illegal trade. In order to try to find alternatives in the fight against these illicit acts, the Latin American Anti-Smuggling Alliance, which is composed of 15 countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, Uruguay and Venezuela.

The first meeting of the Alliance was held in early October in Bogotá, the capital of Colombia. Representatives of governments, civil associations, companies and unions in the member countries met to discuss and establish shared actions that allow greater control over the illegal trade in cigarettes, textiles, beverages, food, plastics and metals.

Based on the discussions, an action plan against illicit trade - contemplating several proposals evaluated at the meeting - will be formalized and presented during the 25th Iberoamerican Summit of Heads of State and Government, to be held in Cartagena, Colombia, on the 28th and October 29.

 Today, cigarette smuggling is one of the most serious issues, and Brazil is one of the most affected by this illicit market. To get an idea of ​​the extent of the problem, in Brazil, 30% of the cigarette market is dominated by brands from Paraguay that enter the country without paying taxes, without generating jobs and without respecting the rules of health surveillance. In 2015 alone, this volume represented a tax evasion of R $ 4,9 billion to public coffers, an amount that could have been invested in areas such as health, safety, housing or even other public policies.

It is worth remembering that one of the main causes for the increase in smuggling is the amazing difference that exists between the prices of products - the result of absolutely unequal tax policies between countries. While in Paraguay cigarettes pay taxes that do not exceed 16%, in Brazil this percentage can reach more than 80%. In other words, the greater the tax burden on national products, the more competitive they become, which are illegal, and the more the population suffers from the increase in crime and the trafficking of drugs and weapons.

To try to reverse this scenario, one of the measures proposed during the Alliance's workshop was to establish cooperation between countries for a joint tax calibration. This movement is essential for combating the illicit trade of various products and can have significant effects in reducing the enormous competitive advantage that smugglers have over legally established industries.

Another cause that must be tackled is the massive supply of illegal products. In the case of Brazil and other Latin American countries, there is a shortage of agents - in addition to inadequate infrastructure in all squares and stations - to inhibit the entry and distribution of these products that move freely across border regions. Intelligent articulation between countries is needed, with an exchange of information online and also with structured actions to control free trade zones and customs regimes.

By participating in the initiative of the Latin American Anti-Counterfeiting Alliance, we identified an opportunity for the countries involved, including Brazil, to find common ways to combat illegal activities, which do not respect borders, governments and police authorities. Without coordinated work, with intelligence and mutual cooperation, we will hardly be able to overcome this great transnational challenge.

(*) Article published on UOL on 17/10