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Smuggled Chinese Cigarettes Increasingly Reach Latin America

Smuggled Chinese Cigarettes Increasingly Reach Latin America

By Juan Delgado/Diálogo
December 07, 2021

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Smuggled Chinese cigarettes are flooding Latin America through a network of Panama-based shell companies that ship enormous quantities to the region, which does not have a legal market to sell them. These were the findings of an investigation conducted by the Organized Crime and Corruption Reporting Project (OCCRP), an international investigative reporting organization specializing in organized crime.

According to the study OCCRP published in June 2021, these Panama-based companies would have links to the China National Tobacco Corporation (CNTC), flooding countries like Mexico, Ecuador, Colombia, and Brazil with CNTC brands such as Golden Deer and Silver Elephant. The cigarettes are sold with labels in Spanish, suggesting that they are specifically produced for Latin America, although Chile is the only country where it is legal to sell them, the organization reported.

OCCRP cites Colombia as one of the most affected countries. In July 2020, Colombian authorities seized the largest contraband of cigarettes in the country’s history with the discovery of more than 4 million packs of cigarettes in Bogotá, the Colombian radio network Radio Caracol reported. OCCRP explained that, according to a Colombian Tax and Customs Police database on seizures, CNTC produced six of the 10 brands authorities seized in the country from 2015 to August 2020.

“This type of [cigarette] smuggling is linked to another type of illegal trade in partnership with local groups, and under the control of Chinese triads based in the region,” Sergio Cesarín, coordinator of the Asia Pacific and India Studies Center at the National University of Tres de Febrero in Argentina, told Diálogo.

For Cesarín, cigarette trafficking is another component of transnational crime. “It could be associated with weapons, drugs, and even human trafficking,” he said.

The international organization InSight Crime, which investigates organized crime in Latin America, indicated in an October 2021 report that, while Paraguay provides most of the supply of illegal cigarettes in the region, China is now a major supplier whose main advantage is its price. “Contraband Chinese cigarettes are sold at around a fifth of the price of their legal competitors in countries including Colombia and Mexico. In Ecuador, the difference can be as much as tenfold,” the institution reported.

“Much of this difference is a result of the high taxes many Latin American governments have placed on cigarettes. According to figures from the Organization for Economic Cooperation and Development [OECD], taxes on tobacco average 48 percent across the region, but [they] can be as high as 80 percent in countries such as Chile and Argentina,” InSight Crime said.

In this regard, the organization highlighted that, although the high prices due to taxation have been quite effective in reducing tobacco consumption, smuggling threatens these achievements, causing regional governments losses of about $6 billion a year in tax revenue.