The tobacco production chain in Brazil generates thousands of jobs and income. The country is the largest exporter in the world. In 2016, 538 thousand tons of tobacco were produced and 483 thousand tons were exported.
144 thousand families produce tobacco with a gross production value of R $ 5,2 billion. But this market is under threat due to the significant growth, in the last 3 years, of illegal cigarette sales.
In an interview with Rádio CBN de Curitiba, the president of ETCO talks about the main port of entry for smuggled cigarettes in the country, which is the state of Paraná.
In Brazil, illegal cigarettes represent 48% of the market
In Rio, where the number reaches 44%, they moved R $ 1 billion in 2017. Income that caught the attention of militias that work in communities.
Any stall on the street has to sell, even the corn vendor completes the day's income with cigarettes. The pack, offered in downtown Rio de Janeiro, comes from another country and is much cheaper than competitors made in Brazil. The package of ten packs is still on sale: R $ 25. It's all Paraguayan cigarettes and arrives here illegally.
From the border, the illegal product travels on important highways until it reaches commerce. Gift packaging indicates that the product cannot be marketed outside Paraguay. Even so, it is already the best seller in the state of RJ.
In the country, four of the ten best-selling brands are clandestine. Paraguayan cigarettes are cheaper because taxes in the neighboring country are lower than here. The profit margin is large. When it leaves the factory, each packet costs about 20 cents and reaches the final consumer at a price of R $ 2,50 to R $ 3.
In Brazil, illegal cigarettes already represent 48% of the market. In Rio alone, where that number reaches 44%, they moved R $ 1 billion in 2017, a source of income that caught the attention of militias that work in communities. See in the report of FANTASTIC.
(Article published in Exame Magazine - Edition 1163)
by: Raphael Martins
The crisis reduced the purchasing power of the Brazilian. The tax burden stifles formal business. Control over borders remains fragile. Who wins with all this? Illegality, which has been on the rise since 2014 and sets a new record
On the eve of a world cup, like the one that starts on June 14 in Russia, the Brazilian's passion for football multiplies the sales of national team shirts. At that time, demand for the canary uniform is 20 times higher than normal, according to Nike, a supplier brand of the Brazilian Football Confederation (the company does not disclose the quantity). So far, it's great news for Nike and retailers eager to cash in on the great phase of the team coached by Tite. But an important portion of the Brazilian fans must appeal to pirated copies of dubious origin, thus aggravating a known problem in the country: that of illegality. Only a third of the uniforms of stars like the versatile Neymar and striker Gabriel Jesus sold around are, in fact, original. According to Ápice, the Brazilian association of sporting goods manufacturers, the presence of such swings hampers investments in the sector, tied at 1,2 billion reais a year. “We could contribute up to 35% more in Brazil”, says Marina Carvalho, Ápice's director.
The slowdown in investments in sporting goods is only one of the consequences of the ills caused by the sale of contraband, counterfeit goods and all types of production that disrespect copyrights or pay taxes in Brazil. This market moved 1 trillion reais in 2017, equivalent to Colombia's gross domestic product and a record for national standards, according to the Underground Economy Index, calculated by the Getúlio Vargas Foundation and the (ETCO), a social organization to combat corporate deviations such as illegality. The numbers reinforce a terrible trend: the “gray economy”, dependent on illegal goods and services, has grown again. After a decade in which the share lost to informality fell, year after year, from 21% to 16% of GDP, since 2014 the informal economy has grown again - last year it reached 16,6% of the sum of wealth produced in Brazil. To discuss the causes of the repique, EXAME magazine and ETCO promoted the Forum Against Illegality, held on May 24 in São Paulo. The event was attended by authorities such as the former governor of São Paulo and pre-candidate for the PSDB for the Presidency Geraldo Alckmin, as well as specialists such as lawyer Edson Vismona, president of ETCO, economist Samuel Pessôa, of the Brazilian Institute of Economics of FGV, former São Paulo Public Security Secretary Eduardo Muylaert and sociologist Caio Magri, president of Instituto Ethos, a non-profit organization for the dissemination of good governance practices. To debate the effects of illegality on business, the president of cigarette maker Souza Cruz, Liel Miranda, the founder of clothing and accessories brand Osklen, Oskar Metsavaht, and the vice president of fuel manufacturer Raízen, also participated in the debate. Antonio Ferreira Martins, as well as Marina Carvalho, from Ápice.
Behind the increase in illegality rates there are a number of factors that interact with each other. "Informality is a complex problem: it ranges from pressure on the tax burden due to income transfers to distortions caused by small organized groups that are able to impose agendas of private interest, such as exemptions, to the detriment of the collective need," said economist Samuel People at the event organized by EXAME. A consensus in the debate was that the economic crisis, experienced since 2014 and from which the country has not yet completely emerged, is an important part of the problem. Starting with the impoverishment of the Brazilian. The recession brought GDP down and doubled the unemployment rate, which is at 12,9% of the active population. The consequence: in four years there was a 9% drop in the average Brazilian income, who was more tempted to exchange the original for the copy. According to a survey by the Trade Federation of Rio de Janeiro, carried out in 2016, at the height of the crisis, 96% of the 1 respondents stated that having the low price as the main attraction for buying a product. Of this total, one third admitted to having already consumed piracy to save resources.
To make matters worse, companies that continued to be formalized in the recession were penalized by the government's searchable revenue in the fight against the leak in public accounts. Although the crisis depressed consumer demand across the country, the tax burden has increased by half a point since the beginning of the crisis: today it is 32,4% of GDP, well above the Latin American average of 13%, and close to OECD level, club of the richest countries in the world, where the productivity and quality of public services justify the average annual bite of 34% of GDP. In the midst of all this, the diminished public coffers helped to trigger a public security crisis in many states. Result: there was an escalation of cargo thefts, which practically doubled since 2013. Last year, the rate closed at 11 occurrences per 100.000 inhabitants, according to data from the Brazilian Forum on Public Security, a center for the study of crime. The proliferation of assaults on truck drivers in areas where the crisis has gotten stronger, such as the suburb of Rio de Janeiro, has opened up more space for smuggling. Nowadays, Rio's public transport is full of street vendors with meat, milk, treats and all sorts of goods stolen in the neighborhood.
“MATA-RATO” PARAGUAY
The damage caused by the gray economy is not felt homogeneously in the different production chains. Nothing beats the damage done to cigarette manufacturers: 60% of the 20 billion reais handled by smokers in the country in 2017 went to the informal economy. Almost all of this criminal market is occupied by brands smuggled from Paraguay, a country in which the average tax burden is 16% of GDP - in Brazil, the tax on the tobacco industry is equivalent to 70% of the sector's revenue. With so much tax on national production, and such laxity on the borders on the sweepstakes coming from Paraguay, it is not surprising that the cigarette brand most sold in Brazil is Paraguayan. This is Eight, a real “killer mouse” with nicotine levels 20 times higher than the national ones. Found on the internet and in bars around the country for up to 2 reais a pack - the cheapest Brazilian cigarettes, Belmont, Continental and Minister, cost at least 5 reais -, Eight holds 12% of the market in the country, ahead of traditional competitors such as Derby, Free and Hollywood. “We need to guarantee, through Mercosur or other groups in which Brazil participates, pressure to match the competition”, says Liel Miranda, president of Souza Cruz. “Our taxation is regressive. It penalizes the poorest in price and pushes it towards a product of poor quality. ” Next in the list of the most pirated products are glasses and clothes, including the shirts of the Brazilian selection: the illegal market for these items represents 31% and 15% of the total, respectively.
The advance of piracy is not limited to consumer goods. Another affected market is pay TV, the fourth most consumed item in the underground economy. According to the Brazilian Pay-TV Association, 3,3 million households have clandestine cable and internet connections - the illegal service became known as “gatonet”. If legalized, gatonet would be the country's third largest operator. One of the mandatory items of the sacoleiros in Ciudad del Este, a Paraguayan mecca of swag on the border with Brazil, is the satellite signal receivers for closed channels sold for over R $ 200. Today, 13% of Brazilian pay TV spending is directed to illegal operators. The spree, however, may be about to end. A bill pending in the Senate provides for a fine of R $ 10 and a prison term of six months to two years for anyone who distributes or receives pirated pay TV signals - despite a public consultation by the Senate itself showing that 000% of Brazilians reject criminalization gatonet. "We have to get out of the situation where evasion, cargo theft and other crimes can be accommodated within the Brazilian way," says Antonio Ferreira Martins, legal vice president at Raízen, who recalls that cars in the country consume 95 billion reais per adulterated fuel year.
In the face of so much piracy, how to fight the problem? Advancing tax changes would be a good start. The Congressional commission for tax reform, which ended last year in the face of the problems of the Michel Temer government, is expected to resume work in June and is expected to send a proposal to plenary in June. The main measure considered is to transform nine consumption taxes into two: value added tax (VAT) and an additional for certain categories, such as cigarettes. The idea is to tax less goods and services to make the original products cheaper - and therefore reduce the difference in relation to the pirated product, which costs less. “We would leave the worst tax system in the world for the best”, says the measure's rapporteur, deputy Luiz Carlos Hauly (PSDB-PR). The proposal has the support of the President of the House, Rodrigo Maia (DEM-RJ), and presidential candidates. “Worldwide, taxation is done with VAT. It is urgent to simplify our tax model to regain competitiveness and reduce tax evasion ”, said Geraldo Alckmin at the event organized by EXAME. “We have a notary culture in Brazil, with rules and more rules. The craze for creating charges for each case is what makes the system so complex. ” In parallel, a private sector project has been gaining momentum. At the initiative of the Association of Industrialists of Colombia, a group of business entities from 15 countries, including Brazil, created in 2016 the Latin American Anti-Counterfeiting Alliance to jointly oversee piracy and pressure governments to tackle the problem. "The plan is for the group to be chaired by people from the private sector and the government, as well as members of the Itamaraty, the Institutional Security Office or the Federal Revenue Service," says Edson Vismona, ETCO's president. There is no shortage of proposals to combat piracy. It remains to be seen whether they will be adopted with strength and speed in the face of a growing problem.
HOW TO SOLVE THE ILLEGAL ECONOMY PROBLEM IN BRAZIL
Business, political and third sector leaders discussed the perverse effects on the Brazilian economy of consumption of goods and services that do not pay taxes or respect competition rules - which includes counterfeit copies and smuggled items from countries with a lower tax burden than Brazil
At a time when Brazil is debating the complexity of its tax system, the damage caused by the so-called “gray economy” (piracy and other illegal practices) is impressive: every year, 15 sectors lose more than 100 billion reais and the government loses almost 50 billion reais in evaded taxes.
EXAME magazine held the EXAME Forum - Fight against illegality today, with the sponsorship of ETCO. The event brought together businessmen, economists and representatives of civil society to debate and discuss proposals on the topic.
Issues such as the high tax burden and its complexity, were raised by the president of ETCO in his opening lecture, as one of the main challenges in the fighting the illegal market.
Despite the damage done to society and the public coffers, everyone agreed that the topic is not discussed as often as it should.
"The lack of discussion is a challenge when facing underground trade, because it is underground that moves and moves billions of reais," said Edson Vismona, president of ETCO.
For economist Samuel Pessoa, tax simplification is the main path to be taken to solve the problem.
"There are small economic groups with a lot of weight in the congress, that manage to make noise and, thus, approve tax exceptions". he says that building a much more simplified tax system would have an impact on the Brazilian economy similar to the Real Plan.
The former governor of São Paulo and pre-candidate for the Presidency of the Republic by the PSDB, Geraldo Alckmin, was also present at the event. He received from the hands of the president of ETCO, the Security and Development Manifesto, document that registers the principles and proposals defended by the Movement in Defense of the Legal Market, led by ETCO and FNCP, which brings together more than seventy civil society entities. The former governor also received the ETCO Manifesto on Taxation and Development, this with principles and proposals defended by the Institute.
Mayor opens Security and Development seminar: the importance combating the illegal market
The President of the Chamber of Deputies, Rodrigo Maia (DEM-RJ), speaks at the opening of the seminar Security and Development: the importance of fighting the illegal market, in Brasília - Keiny Andrade / Folhapress
The decrease in the presence of the State and the creation of legally safe environments for investments were pointed out by Rodrigo Maia (DEM-RJ), president of the Chamber of Deputies, as measures for the country to move forward in several areas, including combating violence and smuggling. at borders.
According to Maia, it is necessary to discuss and reformulate the current legislation to change the scenario of a bureaucratic model that prevents the country's growth. “We are experiencing a great anomaly today regarding the laws, the Brazilian State and its enforcement. We should have a clear and agreed objective for these issues to be treated in a more transparent and more serious manner ”, he said.
The deputy's speech opened the seminar on Security and Development: the importance of combating the illegal market, carried out by Folha, sponsored by ETCO, this Tuesday morning (20), in Brasília.
The parliamentarian said that structural reforms are needed in all political spheres. "If we do not have the courage to face this system, year after year, we will have the advance of smuggling, counterfeiting and violence."
According to him, “some have the courage to face controversial issues and with rejection in society. Others prefer that time gives a solution to these problems ”. At various times, the president of the Chamber of Deputies stated that it was necessary to rethink the state's role in society.
For Maia, the public machine hinders and removes the interest of investors. “Often, in the middle of an investment process, the government tries to change rules to increase its collection. We need to guarantee this security so that the private sector can invest more in our country, ”he said.
REGULATORY AGENCIES
Maia also criticized the performance of Brazilian regulatory agencies. According to him, the appointment by political office undermines the efficiency of the entities. “There may be very good people there, but that is luck. There is no clear rule for having at the agency people who are really concerned with the topic they are dealing with. The nomination rules must be stricter so that we have people representing the Brazilian state, and not the government. ”
LACK OF MANAGEMENT AND BUDGET
The deputy said that the low budget harms the fight against organized crime and violence. As an example, he cited the two border control programs developed by the federal government: the dry areas, commanded by the Army, and the maritime borders, under the responsibility of the Navy, and which are delayed by the lack of management and investments.
“It is already known where the problem is, which border has the most problems, where the criminal factions are, how they command the crime from inside the prisons. But we are all immobilized, ”he said.
FINANCIAL CONTROLS
The modernization of financial control systems was mentioned as part of the solutions to deficits in several areas of Brazilian inspection.
"The inclusion of digital platforms will curb various illicit practices, from tax evasion to movements that finance organized crime," said Maia.
The mayor said that it is also necessary to pay attention to public spaces to prevent the spread of criminal practices.
"There is no degraded public space that illegality does not command and benefits from," he said.
Expert explains the connection between smuggling associations in Latin America and terrorist organizations
The integration and reinforcement of communication between different organizations to combat smuggling and illegal trade, in Brazil and
in other countries, they are the main way to successfully curb the practice of these crimes, which, in some cases, are linked to terrorist actions abroad.
This was one of the conclusions of experts who debated the topic during the seminar on Security and Development, organized by Folha, sponsored by the ETCO Institute (Brazilian Institute of Competitive Ethics), this Tuesday (20th), at the theater of the Centro de Eventos Brasil 21, in Brasília. The debate was mediated by Folha journalist Fernando Canzian.
According to the deputy secretary of the Federal Revenue Service, Paulo Ricardo Cardoso, combating these highly organized crimes is an important step towards improving the business environment in the country and helping to ensure agility in the flow of foreign trade.
“Today the volume of seizures is growing. The more you learn, the more you have contraband. We get the impression that we are mopping the floor with the tap running ”, he said.
Paulo Ricardo Cardoso, deputy secretary of the Federal Revenue Service, Antonio Carlos de Sousa, director of intelligence at Coaf, Edson Vismona, president of the Etco Institute, and Emanuele Ottolenghi, senior member of FDD, during the seminar in Brasilia - Keiny Andrade / Folhapress
INTELLIGENCE ACTIONS
Despite praising the federal intervention in Rio de Janeiro, Cardoso said that it will not solve the problem of crime and that the only way to combat it is by promoting incentives for investigative intelligence actions and an increasing integration of national and international research institutions. combating smuggling.
“Weeks ago a large arms dealer in the USA was arrested, who sold to Brazil. We arrived at it through the integration of the Brazilian and American intelligence structures. This is what reinforces the fight against these crimes ”, he said.
For ETCO President Edson Vismona, strengthening the communication mechanisms and bringing information closer to the intelligence agencies is the most effective and least expensive way to stop smuggling. He defended the creation of a Latin American alliance against this type of crime and also a greater engagement of civil society, requesting and
supporting measures in the area. “Evil makes connections, unites, interacts, so we have to do the same. Otherwise, cities and citizens are the ones who suffer the consequences of these crimes, ”he said.
TERRORISM
Emanuele Ottolenghi, senior member of the FDD (Foundation for Defense of Democracies, institute for producing strategic knowledge on national security), commented on the link between smuggling organizations in Latin America and terrorist agencies.
He gave as an example an American criminal association that joined the Mafia in Calabria, Italy, to smuggle cocaine from Colombia into the European market. Among those arrested in the smuggling network, according to Ottolenghi, only one was not from the American criminal organization or the Italian mafia.
“There was a Lebanese, who lived more than a thousand kilometers from southern Italy. He was the man responsible for receiving, laundering the money and redistributing it to drug dealers in Colombia, ”he said.
“Why call on a foreigner, who was not part of either side of the business, to manage the most sensitive part of the transaction? The reason is that he worked for Hezbollah, a terrorist organization that has a global network capable of laundering money and handing it back to the criminal cartel, taking 20% of the profit. ”
Also according to Ottolenghi, in Latin America, smuggling does not always exploit only the geographical weakness of national borders, but also the structural corruption of the people who control them, making payments to judges and authorities to facilitate the passage of the goods.
He stated that, in addition to financing terrorism, it is necessary to be concerned about smuggling because it is what allows criminal unions to operate within Latin American countries like Brazil and Paraguay, leading indirectly to the escalation of violence in the region.
DRY THE TAP
One of the main ways to curb smuggling and money laundering is to suppress the financial sources of these organizations, according to the director of intelligence at Coaf (Council for the Control of Financial Activities), Antonio Carlos de Sousa.
“You can only arrest the bandit, but he will get out of there rich. It is necessary to break down criminal associations economically, ”he said.
In the case of Brazil, Sousa defended the creation of a national strategy to combat money laundering and corruption, emphasizing the important role of the economic sector in the initiative.
One action that Sousa cited as fundamental was the obligation for banks to automatically communicate to Coaf more information on cash withdrawals made above R $ 100 thousand. In December 2017, this amount dropped to R $ 50 thousand.
"When you suppress that payment, these organizations will feel the blow," he said.
"It is impossible to control Brazilian borders without technology, which must also be done in partnership with neighboring countries, places of birth for most transnational crimes practiced within Brazil." The statements were made by the Chief Minister of the Institutional Security Office, Sergio Etchegoyen, during the seminar on Security and Development, promoted this Tuesday (20th) by Folha, sponsored by the ETCO Institute (Brazilian Institute of Ethical Competition), in the Center of Events and Conventions Brasil 21, in Brasília.
“It is absolutely impossible to control borders without technology. There is no chance that we will monitor such large areas, both land and sea, that have such intense traffic, in such remote regions, without technology ”, he said. According to the minister, work is being carried out to create an integrated system to monitor borders, in partnership with other countries.
Etchegoyen, in his speech, also spoke of the characteristics of cross-border and transnational crimes. “It is necessary to differentiate one from the other. Cross-border is a small crime, with a limited scope to its geographical area of activity. The transnational corporation has structures on both sides of the border, it has national reach and even outside. And that is obviously the priority that has been established. ”
The minister also said that the different characteristics of the border are an obstacle, but that there are no discussions involving hatred and prejudice, as elsewhere in the world. “[Borders are] our wealth and our greatest challenge. There are 16.700 km of the most varied natures. At the same time, there are some competitive advantages. In no meter do we identify border tragedies that occur worldwide, with exclusion, hatred and prejudice. ”
Also according to the minister, transnational crimes are mostly born outside Brazil and, therefore, it is important to strengthen relations with neighboring countries. He said the government has been talking about the issue with all South American countries except Venezuela, because of the problems faced in the country of dictator Nicolás Maduro. “But the biggest sources of concern about transnational crimes are not there.
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On the eve of a world cup, like the one that starts on June 14 in Russia, the Brazilian's passion for football multiplies the sales of national team shirts. At that time, demand for the canary uniform is 20 times higher than normal, according to Nike, a supplier brand of the Brazilian Football Confederation (the company does not disclose the quantity). So far, it's great news for Nike and retailers eager to cash in on the great phase of the team coached by Tite. But an important portion of the Brazilian fans must appeal to pirated copies of dubious origin, thus aggravating a known problem in the country: that of illegality. Only a third of the uniforms of stars like the versatile Neymar and striker Gabriel Jesus sold around are, in fact, original. According to Ápice, the Brazilian association of sporting goods manufacturers, the presence of such swings hampers investments in the sector, tied at 1,2 billion reais a year. “We could contribute up to 35% more in Brazil”, says Marina Carvalho, Ápice's director.
Behind the increase in illegality rates there are a number of factors that interact with each other. "Informality is a complex problem: it ranges from pressure on the tax burden due to income transfers to distortions caused by small organized groups that are able to impose agendas of private interest, such as exemptions, to the detriment of the collective need," said economist Samuel People at the event organized by EXAME. A consensus in the debate was that the economic crisis, experienced since 2014 and from which the country has not yet completely emerged, is an important part of the problem. Starting with the impoverishment of the Brazilian. The recession brought GDP down and doubled the unemployment rate, which is at 12,9% of the active population. The consequence: in four years there was a 9% drop in the average Brazilian income, who was more tempted to exchange the original for the copy. According to a survey by the Trade Federation of Rio de Janeiro, carried out in 2016, at the height of the crisis, 96% of the 1 respondents stated that having the low price as the main attraction for buying a product. Of this total, one third admitted to having already consumed piracy to save resources.
In the face of so much piracy, how to fight the problem? Advancing tax changes would be a good start. The Congressional commission for tax reform, which ended last year in the face of the problems of the Michel Temer government, is expected to resume work in June and is expected to send a proposal to plenary in June. The main measure considered is to transform nine consumption taxes into two: value added tax (VAT) and an additional for certain categories, such as cigarettes. The idea is to tax less goods and services to make the original products cheaper - and therefore reduce the difference in relation to the pirated product, which costs less. “We would leave the worst tax system in the world for the best”, says the measure's rapporteur, deputy Luiz Carlos Hauly (PSDB-PR). The proposal has the support of the President of the House, Rodrigo Maia (DEM-RJ), and presidential candidates. “Worldwide, taxation is done with VAT. It is urgent to simplify our tax model to regain competitiveness and reduce tax evasion ”, said Geraldo Alckmin at the event organized by EXAME. “We have a notary culture in Brazil, with rules and more rules. The craze for creating charges for each case is what makes the system so complex. ” In parallel, a private sector project has been gaining momentum. At the initiative of the Association of Industrialists of Colombia, a group of business entities from 15 countries, including Brazil, created in 2016 the Latin American Anti-Counterfeiting Alliance to jointly oversee piracy and pressure governments to tackle the problem. "The plan is for the group to be chaired by people from the private sector and the government, as well as members of the Itamaraty, the Institutional Security Office or the Federal Revenue Service," says Edson Vismona, ETCO's president. There is no shortage of proposals to combat piracy. It remains to be seen whether they will be adopted with strength and speed in the face of a growing problem.
EXAME magazine held the EXAME Forum - Fight against illegality today, with the sponsorship of ETCO. The event brought together businessmen, economists and representatives of civil society to debate and discuss proposals on the topic.
The former governor of São Paulo and pre-candidate for the Presidency of the Republic by the PSDB, Geraldo Alckmin, was also present at the event. He received from the hands of the president of ETCO, the Security and Development Manifesto, document that registers the principles and proposals defended by the 
