Companies and the defense of the legal market

Initially the focus was on the product, the industry should improve the means of production, reduce costs to meet the demand with attractive prices. For this, the development of the assembly line was fundamental, with mass production significantly increasing the offer. The consumer would buy what was offered to him. Henry Ford said, "A customer can have any car he wants, as long as it's black." This phrase translates this conception, the lowest cost in less time, maintaining the standard in manufacturing.

However, after conquering the good, the consumer began to demand more and whoever offered products with better quality and lower cost would have an advantage. Competition became fiercer. In this direction, to conquer the market, sales, marketing and advertising strategies were developed. The sales process has become more and more sophisticated.

Constant improvement of quality, technology, the permanent search for innovation are commandments, but in addition to the product, supply and purchase, the after-sales service has been increasingly strengthened. Companies must understand and serve the consumer, especially if the product has a problem. Respect for the customer is an obligation of companies. President John Kennedy's March 15, 1962 speech stating “Consumers, that's all of us” ushered in a new era introducing the fundamental rights of consumers: safety; information; free choice and to be heard.

However, in addition to meeting these fundamentals, new challenges are presented. It is not enough to face the natural competition in the conquest of the market, more and more companies have to face the insidious action of competitors who illegally seek profit without complying with the current rules, distorting the sense of fair competition. Thus, counterfeiting, counterfeiting, piracy, smuggling, fraud, cargo theft, tax evasion and import under-invoicing represent concerns that entrepreneurs must have today, dedicating financial and human resources in this effort to ward off these constant threats.

There is no productive sector that is immune to the actions of the illegal market, which in 2021 alone, according to data collected by the National Forum Against Piracy and Illegality from fifteen productive sectors, moved BRL 300,5 billion in Brazil (sum of the losses of companies plus estimated tax evasion).

Thus, business leaders also have to define strategies to defend the legal market, either with actions with the public authorities to combat the supply of illegal and discourage demand, where price is a determining factor, directly impacted by taxes that only the legal pays. .

In this complex context, it is important to emphasize that the consumer is fundamental, his power of choice defines the course of the market and in the same sense, public agents can curb illegal offers. As soon as they know about the origin of the product, if the technical standards that guarantee its health and safety are respected, if the product has not been stolen, if the taxes due have been paid and have a direct channel with the company that manufactured it, the illicit market space will be contained.

These conditions are already met by current digital technologies of systemic traceability, which, through the use of nanotechnology and blockchain, mark products and refer to a process of direct communication between the product and the consumer, via smartphones that can be applied to the most diverse materials (plastic, metal, liquids, paper, fabrics, gold, diamonds and explosives). In this immediate contact, accessible by intelligent QR Code, all information can be generated by the companies in order to identify the originality, compliance, if it was stolen or if it is indexed to the invoice. In a very simple way, in the pandemic, access to menus by smartphones, via QR Code, popularized this technology, albeit at a basic level.

This innovation is being stimulated by public administration measures. The Brazilian Army defined, through Ordinance No. 122 of COLOG of 15/09/2021, the marking of explosives that enables traceability even after detonated and the Federal Revenue, through Ordinance 165 of 12/04/2022, instituted the Brazilian Program of Fiscal Traceability (Rota Brasil) with the objective of “creating a national standard applicable to the systemic controls of production and traceability of products, identifying the origin of the product and its follow-up in the production chain, in addition to the repression of illegal imports and production and the commercialization of counterfeits”.

In fact, companies have in traceability a powerful instrument that will allow the effective fight against illegality, incorporating the consumer and the public authority in this action and, importantly, with a viable cost and without interfering in the production line, protecting consumers, the reputation of the brands , meeting compliance rules and the 17 UN sustainable development goals.

Ruler and compass are available for these new directions in the challenge of this century to defend ethics in the market and preserve companies that stimulate the economy by generating investments, jobs and income.

Brazil loses R $ 291,4 billion to the illegal market

Brazil lost R $ 291,4 billion reais to the illegal market in 2019, according to a survey that has been carried out since 2014 by the National Forum Against Piracy and Illegality (FNCP). The value is the sum of the losses recorded by 15 industrial sectors and the estimate of taxes that are no longer collected due to this illegality.

The amount increases much more than the national Gross Domestic Product (GDP). While Brazil's GDP increased by 2019% in 1,1, the illegality market is growing. The loss of the sectors was R $ 199,6 billion, which added to an average of the tax evasion (R $ 91,8 billion) reached R $ 291,4 billion. This average was made with the percentage of 46%, but there are products, such as cigarettes, where the tax can reach 90%.

An estimate by the Latin American Smuggling Alliance (ALAC) also points out that, on average, the illegal market corresponds to 2% of the GDP of Latin American countries. In Brazil, this percentage is at least 7.85%. “The GDP does not grow significantly, it is stabilized, but illegality is increasing more and more”, says Edson Vismona, president of the FNCP.

For the entity, this annual survey is very important for the productive sectors, which thus demonstrate the billion dollar losses to the illegal market. “This action attests that the illegal economy is growing, the damage only increases and it is important to alert society and public authorities to the extent of this gap, emphasizing the need for coordinated and permanent actions to combat illegality, both in the physical and digital markets. , which erodes our development and makes it difficult to attract investments and generate jobs ”, says Vismona.

57% of cigarettes in Brazil are illegal

Cigarettes, the sector most affected by contraband, for example, lost R $ 15,9 billion last year. In 2018, it was R $ 14,4 billion. According to Ibope data, 57% of cigarettes sold in the country are illegal. The latest survey conducted by the institute showed growth in the illegal tobacco market for the sixth consecutive year: of the 57% illegal, 49% were smuggled (mainly from Paraguay). As a result, 63,4 billion criminal cigarettes flooded Brazilian cities - it is known that this product is used to finance militias and drug trafficking.

A study by Oxford Economics also found that the operations of legitimate cigarette manufacturers support 25,9 jobs in Brazil. The illegal cigarette market has stopped the tobacco industry from generating 27 jobs.

Another example of the expression of illegality is seen in the fuel sector, which reached the amount of R $ 23 billion. According to Vismona, this significant value occurred because the segment improved the data. "They added, in addition to losses due to fraud, also theft and fuel diversion in the pipelines", says the president of FNCP.

The FNCP survey has been carried out since 2014 and is based on data pointed out by the productive sectors themselves, which have their own metrics (research, market evaluation). The 15 segments covered by the FNCP study are clothing; glasses; cigarette; Cable TV; personal hygiene, perfumery and cosmetics; alcoholic beverages; fuels; audio-visual; pesticides; cell phones; imported perfumes; sports equipment; toys; software; and electronics (PCs, Servers, Networking, Printers / Toners / Ink Cartridges and Security Equipment).


Action against the illegal market

ETCO and the newspaper Gazeta do Povo, from Paraná, will have a partnership in 2019 to deepen the debate on combating the illegal market. Named #Dentro da Lei, the project started in May and continues until the end of the year, with forums, interviews, in-depth reports and other communication formats. It is “a national awareness and engagement campaign, which aims to promote the defense of national interests through the fight against all forms of illegality, such as corruption, smuggling, counterfeiting and other deviations”, as he explains your project manifest "#IN THE LAW".

The discussions are mediated by important names in journalism, such as Alexandre Garcia, Augusto Nunes and Guilherme Fiuza, and bring together public agents, security consultants, researchers, representatives of the productive sector and professionals from other areas related to the problem.

The #Dentro da Lei project is based on the research that ETCO supported in 2018 to identify the best solutions to tackle smuggling and other forms of illicit trade, which were summarized in the document "10 Measures Against the Illegal Market".

ETCO's executive president, Edson Vismona, has taken these events a global view of the damage that crimes such as smuggling, piracy, counterfeiting, product tampering and cargo theft cause to Brazilian society. They go beyond unfair competition, caused by the sale of these goods, with companies that operate within the law; from discouraging private investment; and the loss of revenue from public services.

Vismona has been warning about how these illicit practices are financing the expansion of organized crime, which uses the same routes and the logistics of smuggling, for example, to transport arms and drugs. They also use their financial power to corrupt public officials in order to facilitate their criminal activity.

“The activities of criminal organizations in the country have reached a dimension that no one else can ignore”, says the president of ETCO. "We are living in an increasingly evident moment of threat to the democratic rule of law, because organized crime is unaware of the existence of authority."

Paraguayan smuggling

The choice of Gazeta do Povo has a strategic reason. Paraná, especially the Foz do Iguaçu region, is the main route for the entry of illegal products from Paraguay, and the newspaper has been covering the topic in a constant and specialized way for several years.

Paraguayan smuggling affects several sectors. The president of Fundação Abrinq (Brazilian Association of Toy Manufacturers), Synésio da Costa, draws attention to the risks that these products bring to the population's health. “The Chinese use recycled plastic to make toys, which is prohibited here. These toys have no finish, so they have sharp parts, in addition to paint with heavy metals, such as cadmium and lead, ”he says. Last year, smuggled toys were the second most seized item by Brazilian police forces.

Medicines are also among the most smuggled products - and the security concern is enormous. "Variations in temperature and humidity, depending on the therapy, can compromise the efficacy and safety of the product, putting the patient's life at risk", warns the Association of the Pharmaceutical Research Industry (Interfarma).

The clothing segment is also quite affected. "As it is a product of first necessity and having this gigantic trade, the textile market ends up offering a lot of illegal opportunities", explains the president of the Brazilian Association of the Textile and Clothing Industry (Abit), Fernando Pimentel.

According to him, the internet has become a new threat to the legal clothing market in the country. “Now, the smuggling of clothing overflows the issue of higher volume commerce and reaches online commerce. This type of commerce is very good, very convenient, but obviously, if there are more and more online transactions, which may not represent a large number individually, they will add up and this becomes a snowball ”, says Pimentel.

Most affected sector

The most smuggled product by far is cigarettes. Last year, seizures in the country broke the historical record and reached an estimated value of R$ 1,4 billion – and everything indicates that the number will be surpassed in 2019. Data show that illegal cigarettes have been gaining ground every year. According to an annual survey by Ibope that assesses the consumption habits of smokers, in 2019 the illicit product came to dominate 57% of the market and evasion already exceeds the sector's tax collection.

Experts say that the main cause of the rise in cigarette smuggling is the difference in the tax burden in Brazil (71%, on average) and in Paraguay (18%). The general coordinator of Combat against Contraband and Embezzlement of the Federal Revenue, Arthur Cazella, says that the product represents 40% of the seizures. “It is the biggest elephant that we have in smuggling. And why is that? Because our cheapest national cigarette costs around R $ 5, their cigarette, around R $ 2,5 ”, compares.

He highlights a perverse aspect of this reality. “This cigarette has no control, no one knows what is inside it. And the population with the lowest income is the most affected, ”he says, recalling that taxes not collected end up being missed precisely by SUS, where the poorest end up treating the health problems associated with smoking.

Tax redistribution

In an interview with #Dentro da Lei, the tax attorney, former secretary of Federal Revenue and president of the ETCO Advisory Council, Everardo Maciel, defended a tax strategy to face the problem. “It is necessary to conceive a type of taxation that allows to face the price of Paraguayan cigarettes in Brazil on equal terms. And, of course, this without reducing the aggregate tax burden - that is, by redistributing the tax burden. Bearing in mind that the reduction of the aggregate tax burden is not advocated here, but a redistribution of the tax burden of cigarettes as a whole, so that one can therefore have a cigarette with a price compatible with what arrives from Paraguay ”, he explained.

Also in an interview for the project, the executive president of ETCO praised the willingness of the Minister of Justice, Sergio Moro, to study the matter, together with his determination to reinforce the crackdown on smuggling, including investments in intelligence and integration of the organs involved in the fight. to crime. And he also underlined the need for campaigns to raise the population's awareness of the losses of complying with the illegal market. “You have to tell people, 'Look, you're financing the crime. This purchase is not innocent. You are damaging the whole society '. ”

In a forum promoted by the project, which brought together several authorities, federal deputy Efraim Morais Filho (DEM-PB), president of the Mixed Parliamentary Front to Combat Smuggling and Counterfeiting, also spoke about the need to raise awareness among Brazilians about the seriousness of problem. “The crime of smuggling, at first sight of the population, is a harmless, tolerable crime. But, by breaking this superficial shell, we identified a crime that is very harmful to the country. It deteriorates the formal job market, inhibits investments, finances organized crime, generates foreign exchange, loss of income and risks to health and integrity consumer ”, he summarized.

To learn more: The contents of the #Dentro da Lei project can be accessed on the website Specials Gazeta do Povo

Illegal product reaches 57% of the cigarette market

A survey by Ibope Inteligência revealed that the illegal cigarette market continues to gain space in Brazil, driven by the lower price compared to the legal product. The consequence is an increase in consumption and a reduction in tax collection. The study also showed that illegal brands already occupy five of the top ten positions in the best-selling ranking, including leadership. Smuggling from Paraguay is the main source of the product sold illegally in the Brazilian market.

The quantitative survey, of national scope, was carried out with smokers aged 18 to 64 years living in municipalities with more than 20 thousand inhabitants, of all social classes, totaling 8.428 people, from January to April this year. According to the study, in the last year, 110,7 billion cigarettes were consumed in the country, an increase of 3% in relation to 2018. This number reflects the advance of the illegal product, which grew so much in absolute numbers (from 57,8, 63,4 billion to 54 billion units) and market share (from 57% to 49%). The illegal market consists of smuggling (8%) and cigarettes made in Brazil in a clandestine manner (48,4%). In the same period, consumption of legal cigarettes fell from 47,3 billion to XNUMX billion units.

Ibope conducts this survey annually since 2014. In the first edition, the illicit product held 40% of the market, an index that has been growing every year. Based on the trend curve verified in the historical series, the institute estimates that, if no concrete measures are taken to change this situation, illegal cigarettes will reach 62% of the market in 2020.

In addition to not undergoing health surveillance, exposing smokers to unknown risks, the smuggled product causes enormous damage to public coffers. Calculation based on the Ibope survey shows that, this year, tax evasion will reach R $ 12,2 billion, above the sector's tax collection, estimated at R $ 11,8 billion. In order to have an idea of ​​what this value represents, it would be possible to create 21 thousand Basic Health Units, 5,9 thousand Emergency Units or 8,6 thousand daycare centers.

The study also follows the evolution of the price of illegal cigarettes, which costs, on average, R $ 3,44, which represents less than half the value of legal cigarettes. The reason lies in the difference between the tax burden of cigarettes in Paraguay, 18%, and in Brazil, 71%, on average. In addition, contraband violates the minimum price required by Brazilian law, of R $ 5 per pack.

With these illicit advantages, Paraguayan brands continue to increase their participation in the national market. This is the case of Eight, the most sold in Brazil, which today dominates 16% of consumption. A year ago, it had 15%. Both this and the Gift brands (3rd in the ranking) and San Marino (6th) are manufactured by Tabacalera del Este, which belongs to the former president of Paraguay Horacio Cartes. The list of smuggled products also includes Classic (8th) and Fox (9th). Together, these five brands account for 37% of the Brazilian market. The five best positioned Brazilians hold 31%.

The current president of Paraguay, Mario Adbo Benítez, who replaced Cartes in August 2018, tried this year to raise the product tax to 40%, but was defeated in the Senate by 28 votes to 13. ETCO's executive president, Edson Vismona, regretted the decision. “Paraguay acts in a conflicting way when it comes to combating cigarette smuggling. On the one hand, the government of President Benítez indicates that it may come to ratify the Protocol for the Elimination of the Illicit Trade in Tobacco, an important instrument for combating cigarette smuggling worldwide. But, on the other hand, the parliament refuses to adopt one of the main premises of the document, the increase in taxes on the product ”, he said.



Correio Braziliense holds seminar on illegal market. Participate! Places are limited.

The event 'Correio Debate 10 measures against the illegal market: the 3 Powers united against Organized Crime 'will bring together experts and authorities to discuss measures to end crime, increase security and contain the illegal market, one of the greatest threats to Brazilian society today. The event is a realization of Correio Braziliense and is sponsored by ETCO.

  • Date ………: 04/09/2018
  • Schedule…: 08h to 14h.
  • Location ………: Correio Braziliense headquarters auditorium - SIG QUADRA 02, 340 - Brasília - DF

Join this debate by signing up for free here. Vacancies are limited.