Tobacco.org

• When Cracking Down Seems Impossible 

The raid had reaffirmed a precedent for an industry accustomed to minimal accountability. “The seizure was a media show,” said José Ortiz, CEO of Tabacalera del Este (Tabesa), the top cigarette factory in Paraguay. Tabesa is reportedly owned by Horacio Manuel Cartes, a high-powered businessman whose holdings include a soccer club. The company’s cigarettes are routinely seized from smugglers in Argentina and Brazil, according to customs officials in those countries. But the cigarettes in Pindoty Porã were legal, Ortiz said, as long as local cigarette taxes had been paid and the sticks were on the Paraguayan side of the border.

José Ortiz, CEO of top Paraguayan tobacco manufacturer Tabesa. “We don’t know where our cigarettes are consumed, and it’s not our problem,” he says. Marina Walker Guevara/ICIJThe investigation remains open and customs may ultimately fine the wholesaler for attempted smuggling. But the case illustrates the virtually impossible task of cracking down on crime and contraband in a country where law often takes a back seat to power and cash. Paraguay ranked near the bottom — 138th among 180 countries — of Transparency International’s 2007 Corruption Perception Index.

The tobacco industry in Paraguay is virtually unregulated. Government agencies involved in its oversight cannot even seem to agree on the number of factories operating in the country. The minister of taxation, Gerónimo Bellasai, told ICIJ that tax evasion by tobacco factories is “very high,” but in March his team was still trying to figure out how to track company sales. A basic step to improve traceability, officials say, is to update the country’s arcane cigarette tax stamp system. Currently tax stamps — square pieces of white paper that are easily photocopied — are affixed on master cases of 10,000 cigarettes rather than on individual packs. But even this can be hard to accomplish. “When there’s a lot of money on the other side, the tax authority always loses,” Bellasai said. . . .

The chief of the Brazilian federal police in Guaíra, Érico Saconato, says there is little political will in his country to fight smuggling. Marina Walker Guevara/ICIJBrazilian and Argentine customs and police officials say they are frustrated by Paraguay’s lack of commitment to stop cigarette smuggling. But they also acknowledge faults in their own governments’ enforcement. . . .

Meanwhile, Paraguayan cigarette manufacturers are earning stunning profits while denying any involvement in smuggling or counterfeiting (Brazilian law enforcement officials, however, link the Paraguayan factories directly to the illicit trade). Those who pursue civil charges against factory owners face endless judicial battles. British American Tobacco has repeatedly sued a tobacco company owned by former presidential candidate Osvaldo Domínguez Dibb for counterfeiting several of its brands. Some lawsuits have slogged though courtrooms for as long as 11 years.

Tabesa’s CEO Ortiz was blunt when asked about Paraguay’s quid pro quo: “We give them money,” he said of politicians during election time. “And all we ask is to be left alone.”

Jump to full article »

• Smuggling Made Easy 

Last September, Guaíra made headlines across Brazil when 15 people were murdered at a makeshift riverside warehouse. The killings were the result of a vendetta among drug smugglers and, officials here say, they weren’t all that unusual. Just 150 miles north from the notorious Tri-Border Area, where Brazil, Paraguay and Argentina meet, Guaíra is today a major weapons and drugs corridor in the region. But no product, police say, is more widely smuggled through this city, and more profitable to smugglers, than Paraguayan cigarettes.

Dozens of motor boats crammed with tobacco cross the Paraná River daily from the neighboring Paraguayan city of Salto del Guairá. The smugglers feed an illicit trade that injects billions of cigarettes into Sao Paulo, Rio de Janeiro, and other large Brazilian cities, where the cheap, untaxed Paraguayan sticks account for 20 percent of the entire cigarette market. Guaíra sits at the heart of this trade, a strategic gateway and a place where many residents — up to half its population, locals say — rely directly or indirectly on smuggling for their livelihood. A few reap millions from the illicit trade. Guaíra’s most famous criminal son, Roque Fabiano Silveira, made a fortune and a name, trafficking Paraguayan cigarettes thousands of miles away. . . .

The tale of Roque Silveira is emblematic of the criminal nature and global reach of the teeming Paraguayan cigarette industry, one that experts and law enforcement officials say is, largely, set up for and devoted to transnational smuggling. Fifteen years ago cigarette manufacturing was minimal in Paraguay, one of South America’s poorest countries and a place notorious for corruption and trading in counterfeit goods. Today Paraguay, a landlocked, California-sized country, ranks among the world’s top producers of contraband cigarettes, responsible for 10 percent of the world’s contraband tobacco, experts estimate.

Paraguay’s factories churned out 68 billion cigarettes in 2006

Jump to full article »

Contraband cigarettes seized  

A cache of five million contraband cigarettes seized in Cavan was worth €1.5 million (£1 million), it was revealed yesterday.

Revenue officials followed the consignment of cigarettes, which arrived in Dublin last Sunday.

The cigarettes had been concealed in bales of plywood that had been shipped in a 40-foot (12-metre) container that originated in Paraguay.

Jump to full article »

• Paraguayan Smuggling Crossroads Scrutinized 

CIUDAD DEL ESTE, Paraguay -- For years, this region -- where the boundaries of Paraguay, Brazil and Argentina converge -- has been considered a teeming stew of globalization's more unseemly byproducts. Much of the trade that crosses the borders, officials say, is illegitimate. The region is full of smuggled goods and laundered money.

Now U.S. officials are launching a broad series of new measures aimed at uncovering money-laundering rings that they believe are funding Hezbollah and other radical groups. . . .

Meanwhile, the State Department this year helped draft stricter anti-money-laundering legislation that was passed by Argentina's congress. The U.S. Embassy's legal adviser in Asuncion, Paraguay has held training courses during the past year for investigators and prosecutors in charge of combating possible terror links, according to the Justice Department.

Glaser said it is the links to Hezbollah and other radical groups that "concern us most."

U.S. officials cite a smuggling case in March in which 19 people were charged in Detroit for allegedly operating an international ring that illegally moved cigarettes through Paraguay and Brazil. The indictment alleged that profits were funneled to Hezbollah. . . .

A trip to one of two warehouses where agents collect three to four tons of confiscated goods from the markets each week offers an instant corrective to that notion. The cardboard boxes are bursting open with pirated CDs and DVDs, PlayStation games, shoes, Hello Kitty dolls and watches. The air smells like tobacco, from thousands of cartons of phony Marlboros.

Jump to full article »

Brazil Seizes Pirated CDs and Cigarettes on Border 

An operation by Brazil's Federal Revenue Service (Receita Federal) in Foz do Iguaçu, Paraná state, on the border with Paraguay, resulted in the apprehension and destruction of half a million illegal CDs (pirated goods) and 250,000 packs of contraband cigarettes. . . .

Rachid said the crackdown this year in what is known as the Triple Border region (where Brazil has a border with both Argentina and Paraguay) has resulted in an increase of 42% in illegal goods confiscated and destroyed (goods worth around US$ 13.4 million - 39.3 million reais). . . .

According to the president of the Sindireceita, Reynaldo Puggi, the entry of US$ 10 billion worth of black market and counterfeit products each year sustains the illegal trade in Brazil.

Cigarettes top the list of illegal merchandise. Around 32% of the cigarettes sold in Brazil are contraband or counterfeit. The fiscal harm caused by illegal cigarette sales alone amounts to US$ 1.2 billion annually.

Jump to full article »

• A Counterfeit Industry Cheats Legitimate Trade 

They are all locally produced counterfeits, part of an illicit cigarette industry that is, at once, a major source of income to thousands in this impoverished country and also a national embarrassment.   

The cigarettes are aimed chiefly at the market in Brazil, just a few hundred yards away. Every day, crowds of Brazilian shoppers venture into Ciudad del Este across the Bridge of Friendship spanning the Parana River that divides the two countries in search of bargains in a place famous for the counterfeit and the contraband, from television sets and telephoto lenses to ammunition and eau de cologne.

Paraguay's recently installed president, Nicanor Duarte Frutos, has promised to do all he can to stop the factories that churn out the fake cigarettes, calling them a symbol of his country's reputation for rampant corruption. Besides violating international copyright laws, the president said, the tobacco firms are not paying local taxes. . . .

"If we don't fight these things, there is no future for Paraguay." . . .

Duarte Frutos was also acting under pressure from the world's biggest tobacco companies, and from Brazil, the United States and the European Union.

Jump to full article »

• Uruguayan tobacco company under investigation 

Souza Cruz, the Brazilian subsidiary of British American Tobacco, has taken legal action against Compania Industrial de Tabacos Monte Paz SA, the Uruguayan tobacco company, for its alleged link with Brazilian cigarette smuggler Joao Celso Minosso.

Jump to full article »

• Paraguay Senate suspects BAT tax evasion 

Paraguay's Senate heard testimony accusing British American Tobacco of evading five million dollars in taxes, Senate sources said.

Senate President Carlos Mateo invited an investigative journalist to testify to his claims that BAT falsified Mercosur certificates of origin through its subsidiaries.

"Using false certificates, BAT imported cigarettes with preferential tariffs, evading millions of dollars," journalist Idilio Mendez told the Senate.

Jump to full article »

• Smugglers, vendors cost Brazil $500 million in taxes 

CIUDAD DEL ESTE, Paraguay - A pack of Hollywood cigarettes at a gas station in Brazil sells for 62 American cents. Street vendors hawk the same brand for 39 cents. Both packs carry the Brazilian tax seal. Both come with the same photo of a very unhappy couple in bed and the warning: Smoking Causes Sexual Impotence.

The difference is that the street vendor's smokes are counterfeit, probably smuggled in from Paraguay. U.S. and British tobacco companies and their Latin American subsidiaries complain that they are losing the equivalent of hundreds of millions of dollars annually to smuggled or fake cigarettes, and they want Brazil to crack down on their smugglers and distributors. Brazil would net $500 million a year in lost cigarette-tax revenue, the industry's thinking goes, knock out unfair competition and maybe even consider lowering cigarette taxes.

Leading the campaign is Souza Cruz, Brazil's largest tobacco company . . .

At least 34 Paraguayan factories make cigarettes, but there's no accounting for their production. Officially, the plants produced 45 billion cigarettes last year and exported less than 10 percent of them. If that's true, Paraguay's 6 million citizens smoke a staggering average of nearly 7,000 cigarettes a year. . . .

On a trip with Paraguayan lawyer Mario Aguilera along the border with Brazil, a Knight Ridder reporter and photographer saw dramatic expansion at Paraguayan tobacco companies, none of which had its name on the building or at entrances patrolled by armed guards. . . .

Johns noted that U.S. tobacco-industry settlements yielded documents showing that BAT, Philip Morris Intl. (now a unit of Altria Group Inc.) and R.J. Reynolds Tobacco Co. relied on smuggling in Latin America in the early 1990s to help expand the smoking population.

Jump to full article »

The moon over Paraguay has a tint of green 

Industry experts say nearly 95 percent of Paraguay's output -- including counterfeit versions of American brands like Marlboro and Camel -- are smuggled through Paraguay's porous borders with Argentina, Bolivia and Brazil and on to the Caribbean, the United States and Mexico.

[This is the 6/10/03 New York Times item.--gb]

Jump to full article »

• Brazil's top cigarette maker fears blacker market 

Souza Cruz, which is owned by British American Tobacco (London:BATS.L), says 46 billion cigarettes were sold on Brazil's black market in 2002, half the legal market of 97 billion and more than Argentina, Uruguay and Paraguay put together.

Paraguay, where production has multiplied and now churns out about 20 times more cigarettes than the country smokes, is the source of about three quarters of contraband, it says.

Souza Cruz has teamed up with gasoline retailers and the world's No.5 brewer, AmBev (Sao Paolo:AMBV4.SA; NYSE:ABV), which faces similar contraband, tax evasion and falsification problems, to form the Brazilian Institute of Ethical Competition, or ETCO, and push the government to crack down on the black market.

Brazilian authorities say they are stepping up the fight against illegal cigarettes, but the industry says the smugglers and producers who evade taxes have also grown as the margins between the legal and illegal markets widens.

Jump to full article »

• Contraband Is Big Business in Paraguay 

95 percent of the country's output, including counterfeit versions of American brands like Marlboro and Camel and Latin American favorites like Derby and Free, are smuggled through Paraguay's porous borders with Argentina, Bolivia and Brazil and then on to destinations as distant as the Caribbean, the United States and Mexico. . .

But now the country has a president-elect — Nicanor Duarte Frutos, who won handily in April and is to take office in August — who has promised to clamp down on "the chronic problems" of counterfeiting and contraband and "build a system of legality," as he put it in remarks he made to reporters on a recent visit to Brazil.

Even if he is to be believed — and there are already signs his zeal for reform might not survive long once he is in office — Mr. Duarte Frutos will have a tough job weaning the economy off contraband, even though most Paraguayans agree it is increasingly urgent that the country kick the habit. . .

Among the first people to congratulate Mr. Duarte Frutos the morning after the election at his heavily guarded home in Asunción was Senator Julio Dominguez Dibb. Mr. Dominguez Dibb's father, Oswaldo, is Paraguay's richest tobacco baron and is under investigation for trying to copy and register as his own trademark the Brazilian customs seal that must be placed on every pack of cigarettes sold in that country. He has denied any wrongdoing.

Jump to full article »

Executivo buscou acordo no Paraguai -- [Executive looked for a deal in Paraguay] 

Threatened for the contraband and the fake of its products, Souza Cross tried to negotiate agreements with two influential Paraguayan entrepreneurs in years 90. The papers gotten for the Value show that the current president of the company, Flavio de Andrade, at the time managing of marketing, travelled two times to Paraguay with this objective in 1992.

It spoke with Nicolás Bo, owner of industry Winning La the cigarette , and Gustavo Saba, owner of a called deliverer Tabacalera . Both are until today powerful men. They are very rich, they have periodicals, diversified television channels and businesses. Bo was next to general Alfredo Stroessner, dictator of Paraguay per 35 years. Saba is son-in-law of general Andrés Rodríguez, that knocked down Stroessner in 1989.

Jump to full article »

Para cada paraguaio, 8 maços por dia [For each paraguayan, 8 packs a day] 

Brazil exported 113 billion cigarettes to Paraguay in the decade of 90. The best year for the industry was 1994, when vendas for the neighboring country had added 23 billion cigarettes. It was the sufficient so that each Paraguayan living creature in that year smoked eight cigarette mallets per day. . .

Estimates divulged for Souza Cross on the Brazilian market suggest that 17 billion cigarettes and 3 billion fakes had been smuggled for Brazil in 1994, equivalents 20% of vendidos cigarettes legally in the country. They is esteem that the Paraguayan plants at the time produced 2 billion cigarettes per year. . .

The documents gotten for the Value are the first ones where executive of Souza Cross and the BAT they inside argue the contraband of Brazil, but similar evidences, involving other subsidiary ones of the group with the illegal market in other parts of the world, had appeared with frequency in the last years.

With base in these evidences, the Européia Union and the 26 regional departments of Colombia are demanding bilionárias indemnities of the Philip Morris, the BAT and the R. J. Reynolds in the United States.

Jump to full article »

After Attacks, Spies Scour for Clues in So. America 

In the shadowy, trash-littered alleyways of South America's contraband capital, spies from distant countries believe something much more sinister than backroom drug deals may be taking place.

Several intelligence agencies have turned their magnifying glasses on the sweaty Paraguayan city of Ciudad del Este, a haven for smugglers and other criminals, in the global hunt for clues to last month's deadly attacks on Washington and New York.

Agents from the FBI (news - web sites) are among the spies swarming the city's black markets, looking for a possible money trail or other connections to the Islamic militants believed to have been responsible for the aerial attacks that has left nearly 6,000 people dead or missing.

Somewhere among the shady cast of arms dealers, drug runners, cigarette smugglers and car thieves known to make their living in the volatile region, local officials said there is a clear connection to suspected Islamic organizations.

Jump to full article »