Wednesday, July 2, 2014

A Set-Up´for Cigarette Smuggling?

Cigarettes for sale on a Bogotá street alongside chips and candy.
Ship Colombian tobacco leaves to Chile to make them into cigarettes to ship back to Colombia?

Executives of British American Tobacco (BAT), which is closing its Bogotá cigarette factory, could probably give very convincing-sounding reasons why it makes economic sense to ship Colombian tobacco leaves to the other end of the continent, roll them up in paper tubes, and then ship them back to Colombia for sale.

Maybe labor is cheaper or more efficient in Chile. Maybe the weather is better there. Maybe Chile's famous cigarette-making tradition means that Chilean-made smokes are higher quality.

But, despite the corporation's arguments, the new arrangement sounds suspicious.

It was not many years ago that, according to investigative journalists and Colombian provincial governments, BAT and its U.S. rival Philip Morris conspired with violent, outlaw organizations to get their cigarettes smuggled into Colombia. Smuggled cigarettes are cheaper, since they don't pay taxes, and are particularly accessible to kids who are just getting hooked on the habit. In addition, the smuggled cigarettes were allegedly used to launder narcotrafficking money.

The companies settled the lawsuit and later purchased Colombia cigarette makers. The big tobacco companies said that they were now combating contraband - which made sense, since it hurt their domestic Colombian cigarette-making business.

Contraband has continued, however, and perhaps even increased again, so that today it is estimated at 15 - 20% of the market. Recently, according to El Tiempo, contraband cigarettes made by the Paraguayan firm Tabacalera del Este - which is owned by Paraguayan president Horacio Cartes - have flooded into Colombia. At least one Colombian department, Bolivar, has filed suit against the Paraguayan company, alleging that it is promoting cigarette smuggling and facilitating money laundering by narcotraffickers.

Those cheap, smuggled smokes hit BAT's market particularly hard, because it makes the low-cost brand Mustang.

Will BAT's Chilean-made, Colombian-leaf smokes enter Colombia legally or via contraband?

It will be worth Colombian officials' time - and their tax revenue - to find out.

By Mike Ceaser, of Bogotá Bike Tours

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