As a salve to my conscience, I have often said that the reason I don’t indulge in marijuana and cocaine — not to mention methamphetamine, deadly when taken as prescribed — is the corrupting power and violence of their business model.
But I am nothing but a hypocrite, it seems. Once a week I double park outside the curbside stand of a discreet camelô and load up on Eight-brand cigarettes — also known as the Paraguayan cousin of Marlboros.
If I had to pay full taxes under Brazilian law, I would be unable to support my dirty habit. During my early days in Brooklyn, I bought American Spirits direct from Indian tribal lands straddling the Canada-U.S. border.
Brazilian 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. Trucks loaded with Paraguayan cigarettes are supposed to pass through several Brazilian check-points along their more than 600-mile journey to Sao Paulo and other large cities.
“There’s no [political] will to combat this sort of crime,” said Érico Saconato, the head of the Brazilian federal police in the border city of Guaíra, which in recent years has become a major corridor for the smuggling of cigarettes from Paraguay. “We know smuggling is one of the sources for campaign financing in Brazil. So, there’s not much interest in messing with it,” added Saconato.
The foregoing and following appeared on the Web site of ICIJ, June 2009
Paraguay’s Customs chief, Carlos Rios, knew he would get a lot of heat from the tobacco industry, but he decided to move forward with the raid regardless. After all, he was part of a new administration that had pledged to end the country’s deeply rooted smuggling culture.
So on February 6, 2009, Rios coordinated the largest cigarette bust in Paraguay’s history: 46 million “sticks,” stored in a shabby, illegal warehouse located one block away from the border with Brazil, in the desolate area of Pindoty Porã. As officers burst onto the scene, seven cigarette-laden trucks idled, preparing to cross into Brazil. Police opened fire as one driver revved his engine and sped across the border.It was an enforcement operation that wouldn’t raise eyebrows in most countries.
But the raid proved an exceptional event in Paraguay, a country that for decades has been branded paraíso de contrabandistas — a smugglers’ paradise. Cigarette seizures rarely occur in Paraguay, where tobacco factories are owned by the some of the country’s richest and most influential.
The country produces far more than the 3 billion cigarettes its residents consume; 68 billion cigarettes were manufactured in 2006, the bulk of which ended up smuggled to neighboring countries and beyond, according to law enforcement officials.
After the Pindoty Porã seizure, even President Fernando Lugo — a former Catholic bishop who in 2008 was elected on a reform platform — congratulated the customs agents who took part in it.
The celebrations did not last long. As the press coverage faded, Rios quietly replaced the core of the anti-contraband unit that had conducted the cigarette raid, a section of Paraguayan customs that receives financial assistance from the U.S. government. He scrambled to explain that the agents had not effectively stopped the influx of contraband seeping into Paraguay from neighboring countries.
Meanwhile, a vociferous chorus of prominent cigarette manufacturers — whose smokes were caught in the seizure — worked behind the scenes, enlisting influential politicians to lobby for their products’ return. In May, after a local wholesaler paid a bond of almost $300,000, customs returned all 46 million seized cigarettes.
That is, 230,000 cartons at let us say US$10 a carton
An unaccountable industry
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.
Cartes assume the Paraguayan presidency after the bloodless coup that deposed Lugo, who is said to have praised the anti-smuggling efforts.
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.The 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.
Back in customs headquarters overlooking the Paraguay River, Rios, the customs chief, spoke of his daily “titanic fight” for resources to run his agency. Paraguay operates only 10 check-points along more than 800 miles of border with Brazil, he said. And for customs agents who earn as little as $300 a month the temptation to accept bribes is overwhelming. “We are defenseless,” he said. Rios has been criticized by the media, however, for not using the resources he does have, including a fleet of speedboats donated last year by the United States, some of them reportedly kept for months at the manufacturer’s plant while smuggling soared.In a country where the cigarette industry carries such clout, those who actively pursue smugglers can find themselves out of a job. Prosecutor Eber Ovelar was suspended in March from his post, and he said he had no doubt the move was politically motivated, linked to his anti-contraband work. …
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