Experts discuss solutions for the illegal market

The Brazilian Institute of Competition Ethics (ETCO) today held a seminar to discuss measures such as the review of taxation formats, bilateral relations with neighboring countries, among other fronts, to combat illegality.

For Edson Vismona, president of ETCO, the equation is simple: high profit and low risk. “A good initiative to tackle the problem on the demand side was the creation of the Ministry of Justice Working Group to assess the possibility of a review of the tax system in the cigarette sector, the most affected by illegality, with 57% of the Brazilian market dominated by organized crime ”.

Luciano Timm, president of the National Council to Combat Piracy (CNCP), stressed that this Working Group indicated that the topic needs to be further investigated. “The Ministry of Justice listened to other government bodies to support the view on the subject. There is a need to collect more economic studies to check whether taxation results in an increase in cigarette smuggling, ”he said.

Adriano Furtado, director general of the Federal Highway Police, said that “we have been acting in the inspection through integration with other agencies so that smuggling is less and less attractive to organized crime. "

João Francisco Ribeiro de Oliveira, general director of Operations for the Federal Highway Police said that “smuggling, especially of cigarettes, directly finances criminal organizations. To combat this crime, the integration and sharing of intelligence between different government agencies is essential ”.

Efraim Filho, federal deputy (DEM-PB) and president of the Mixed Parliamentary Front to Combat Smuggling and Counterfeiting said that “the biggest challenge is to change culture, and to change culture is to change man. Society cannot be tolerant of selling contraband products. This ends up inhibiting the activity of companies from different sectors, many of which are already rethinking their operations and investments in the country. Loses the job market, government and society. It is a game of lose and lose, in which only the offender wins ”.

The event also included Alan Dias, delegate of the Federal Police Chief of Police Crimes Repression and Bruno Paes Manso, author of the book A Guerra - The rise of the PCC ”.

Ethics and legality are fundamental to development

The tobacco industry pays the country's highest tax rates, between 70 and 90%. Meanwhile, taxation in Paraguay is the lowest on the continent, at 18%. The consequence of this, together with the lack of border control, is the growth of the illegal cigarette market in the country. Today more than 50% of the cigarette consumed in Brazil is illegal. As a result, the government stopped collecting R $ 11,5 billion in taxes on the sector last year. In addition, as contraband cigarettes do not meet the phytosanitary standards imposed on Brazilian companies, reducing smuggling will prevent Brazilians from consuming unregulated products. For the Brazilian Institute of Ethics in Competition (ETCO), if the taxes were lower, the consumer would buy more of the national product, and this would increase public revenue.
A survey carried out by ETCO, in partnership with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV IBRE), reveals that 16,9% of GDP - about R $ 1,17 trillion - originates from the informal economy. This calculation includes the production of goods and services not declared to the government. The evasion of taxes and contributions reduces costs and increases the profit of these companies in an illegal way.

“In the meantime, we, who want to keep up with our contributions, encounter all kinds of difficulties. Many 'penduricalhos' have been
placed over the years, and often the Treasury itself cannot understand this whole mechanism ”- highlighted Edson Vismona, president of ETCO and the National Forum Against Piracy and Illegality, during the Taxation and Sustainable Economy panel.
For him, effective practices that guarantee inspection and fair competition are not only a matter of ethics and legality, but, rather, a fundamental step for the development of the
parents. In the case of cigarettes, according to Vismona, the difference in price is drastic: if a pack of legal cigarettes is sold for R $ 7, the one obtained through smuggling can cost only R $ 3.
- Our market is being delivered to the traffic of these illegal products. In states like Mato Grosso do Sul, for example, 82% of the cigarette consumed comes from smuggling.
Organized crime finances itself with these billions that are evaded.


To solve the issue of parallel products and guarantee the survival of companies in the sector, a group composed of several players has been discussing proposals to make legal trade viable and, thus, to benefit both companies and the government. One solution would be to review the taxation model for these industries.
- We agree that the tax burden on these products needs to be high. But we have to look at the demand, act to crack down on criminal organizations that benefit from this money.

If not, the market will be increasingly dominated by smugglers who pay nothing for it. The largest share of the market does not pay tax. Another practice suggested by currents in these sectors is the physical control of beverages and cigarettes. The ETCO president also stresses that the convergence of actions between public authorities and companies must be a two-way street, always respecting those taxpayers who are up to date with their obligations.
- Otherwise, the beneficiary will always be the regular debtor who makes non-payment of taxes his source of income, harming public coffers, competition and the whole of society.

Forum in Asunción debates security, smuggling and terrorism in the Southern Cone

In the week of January 14, Paraguay hosted the 13th Parliamentary Forum on Intelligence and Security. Created in 2014 by the then US deputy Robert Pittenger, the forum was attended by experts and authorities from different countries and aimed to discuss issues related to intelligence policy and threats to international security.

Edson Vismona, president of the Brazilian Institute of Ethics in Competition (ETCO), highlighted the importance of the initiative of the new Paraguayan government in hosting the event for the first time. "Paraguay has shown enormous interest in discussing ways to combat the various forms of illegality that currently prevail in the Triple Border Region" he says.

He also said that "due to the presentations of several countries, including Brazil, without cooperation, integration and coordination between countries, it will not be effective to combat transnational criminal and terrorist organizations and money laundering that threaten the public security of all". Vismona stressed that these criminal groups are currently also financed through the illegal market, in particular cigarette smuggling. "In Brazil, for example, smuggled cigarettes from Paraguay already dominate 54% of the entire national market, and this trade is controlled by gangs across the country."

Robert Pittenger spoke during the opening of the event and stated that "The Triple Border is one of the most critical areas in the world, and for a long time we have allowed drug cartels and terrorist organizations to build and expand their operations in South America". He said that this can no longer be tolerated and that the United States has high expectations for the future of the region.

Among the Paraguayan authorities who participated in the Forum were the Minister of Finance, Benigno López; José Cantero Sienra, president of the Central Bank of Paraguay; Julio Ullón Brizuela, chief minister of the Civil Cabinet; María Epifania González, minister of the Secretariat for the Prevention of Money Laundering; and Arnaldo Giuzzio, head of the National Anti-Drug Secretariat, in addition to Argentine lawyer Juan Marteau, a specialist in financial crimes and international money laundering.


Illegality reaches unprecedented levels and wreaks havoc on the Brazilian economy

VEJA magazine brought in its latest editions a detailed picture of the harm caused by smuggling to Brazil. In the 15/06 issue, the article points to the effects of smuggling on our economy, bringing testimonies from ETCO president Edson Vismona, Souza Cruz, Liel Miranda, and Raízen legal vice president, Antonio Ferreira Martins.

See the full text below:

Finance Committee debates smuggling and counterfeiting of products

Representatives from various government and civil society bodies have demonstrated how they are combating smuggling and counterfeiting of products. In a public hearing held by the Finance and Taxation Commission, held yesterday (21/06), they presented figures on the losses to the Brazilian economy and the difficulties in this work, which extend from the country's land border, of almost 17 thousand kilometers, to e-commerce, via the internet, which sends thousands of goods from abroad by post.

Andrei Rodrigues, general coordinator of the Federal Police's Farm Police, recalls that there is also a culture of acceptance of smuggling and piracy as “less serious crimes”. This makes it even more difficult to face the problem, which is already part of the daily life of the population.

“Don't you think that the contraband product goes only to the street vendor's stool, goes to the sidewalk vendor, but unfortunately it arrives, sometimes camouflaged by an unseemly invoice, anyway, but it arrives in big stores, in large retailers and ends, between quotes, entering into legality from that trade ”.

In addition to smuggling, counterfeiting is also difficult to end. And they are not only goods already famous for piracy, such as DVDs, electronics and cigarettes. According to Claudenir Pereira, president of the National Council to Combat Piracy, even seeds, pesticides, and dental material are falsified.

"The nature of the products matters little for counterfeiting, what really matters for the realization of the crime is economic viability".

Edson Vismona, president of ETCO and the National Forum Against Piracy and Illegality, says that the high tax burden on some Brazilian products encourages smuggling and counterfeiting. He gives some examples:

“On average, cigarettes are 80% tax, gasoline 56%, beer 55%, soda 46%. So, due to this expression of the tax burden, we clearly perceive that any illegality committed in these sectors will have a great competitive advantage: it does not pay taxes and this increasingly encourages illegal action ”.

For the chairman of the Finance and Taxation Commission, deputy Renato Molling, of the Rio Grande do Sul PP, who asked for a public hearing, there is room for reducing the tax burden, as long as everyone pays taxes.

"If we have almost R $ 150 billion in evading contraband, piracy, one of these ways is precisely to improve this issue, which greatly inhibits the productive sector, Brazilian industries suffer very unequal competition, this causes a lot of insecurity".

The panelists recalled that smuggling and counterfeiting encourage other crimes, such as car theft and homicides in border towns. Everyone emphasized that these actions come from major criminal organizations.

Report: Claudio Ferreira - Agência Câmara

Brazil lost R $ 146 billion to the illegal market in 2017

The sale of illegal products in Brazil brought losses of R $ 146 billion to the country last year, according to data collected by the National Forum Against Piracy and Illegality (FNCP) in 15 productive sectors.

The sale of illegal cigarettes hit a record in 2017: 48% of the entire national product market is dominated by brands from Paraguay. As a result, Brazil has become the largest global market for illegal cigarettes, and the most sold brand in Brazil is Eight, manufactured by the Paraguayan Tabacalera del Este, of the Cartes family.

A survey of  (ETCO) shows that Brazilians believe that cigarette smuggling brings huge losses to the country. For 86% of respondents, smuggling encourages organized crime and drug and arms trafficking, and 87% say that these products increase health risks.

Brazilians believe that the fight against smuggling is a topic that should be part of the political debate in 2018: 86% of respondents said that they would not vote for a candidate who refused to fight smuggling. Among the main actions that should be taken by the president-elect to combat the smuggling of Paraguayan cigarettes, closing the border between the two countries would be the most efficient measure for 62% of the interviewees; 74% of the people interviewed pointed out the largest investment in border security actions; and 64% the adoption of laws with tougher penalties for the crime of smuggling.

For Edson Vismona, president of ETCO and FNCP, the result of the survey is not surprising. He believes that the solution to the problem must pass through an integrated action by the Brazilian authorities, but he also points out another problem: “the tax disparity between Brazil and Paraguay is the biggest stimulus for the gangs that dominate this activity. In Brazil taxes on the cigarette sector are, on average, 80%, while in the neighboring country this percentage is only 16%. The Brazilian government needs to address this issue within the scope of Mercosur if it wants to reduce smuggling in the country ”. He also recalls that the neighboring country needs to do its part: “Paraguay cannot act in isolation and the April 22 elections will be an excellent opportunity for Paraguayans to choose a president who is a true ally of Brazil in fighting this crime ”he said.

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)

Cigarette smuggling in Brazil reaches record level in 2017

Brazil has become the largest global market for illegal cigarettes. In 2017, 48% of the brands sold in the country were illegal, with the vast majority smuggled from Paraguay. To get an idea of ​​the size of the problem, today the most sold cigarette brand in Brazil is Eight, manufactured by Tabacalera del Este, a company owned by Paraguayan President Horacio Cartes.

This trade brings huge losses to Brazil. The cigarette sector has one of the highest tax burdens in the country, which, since 2011, means that around R $ 23 billion of taxes in taxes were no longer collected, an amount that could have been reverted to the benefit of the Brazilian population.

But cigarette smuggling does not only bring financial losses to the country. This trade is now controlled by criminal factions such as the First Command of the Capital and the Red Command, and the profits from the activity also serve to encourage the trafficking of drugs, arms and ammunition in the country. Fighting to reduce smuggling is essential to combat the increase in urban violence across Brazil.

In addition to crime and tax evasion, smuggling also contributes to the increase in unemployment, has a negative impact on the competitiveness of companies and harms the health of consumers.

According to a study by the State University of Ponta Grossa, Paraguayan cigarettes have high concentrations of heavy metals, with values ​​up to 11 times higher than those found in cigarettes legally manufactured in Brazil. In addition, the study also found traces of rat hair, cockroach paws and mite colonies in Paraguayan cigarettes seized by authorities.

Several factors contributed to the explosion in cigarette smuggling. Initially, it is necessary to point out the porosity of borders. Brazil has about 3 agents to inspect not only the nearly 17 kilometers of borders, but also ports and airports across the country. Thus, it is practically impossible to prevent the entry of these products in Brazil.

But perhaps the main factor in stimulating cigarette smuggling is the high tax burden. Taxes in the sector represent up to 80% of the value of a pack of cigarettes, while in Paraguay, taxes paid by cigarette manufacturers are only 16%. This tax disparity is a huge stimulus for this illegal trade, and they guarantee profit margins of more than 150% in some cases.

This also undermines the National Tobacco Control Policy, as about half of the cigarette market does not meet the measures stipulated by law such as the minimum price policy and the adoption of warning messages and images about the risks in consumption.

For the president of the  (ETCO) and the National Forum Against Piracy and Illegality (FNCP), Edson Vismona, a country that wants to be big cannot live with this stain anymore. "It is no longer possible to accept that the best-selling cigarette in Brazil is smuggled from Paraguay," he says. “It is necessary to promote the union of forces between the government and organized civil society to find solutions to this problem” believes Vismona.