Illicit trade in cigarettes increases their affordability and consumption as well as the incidence of tobacco-related illness and death. Photo: Juan Apolinar, Unsplash.

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SFU research exposes illicit tobacco trade in Latin America

December 06, 2018
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Two new SFU research papers detailing how Paraguayan tobacco company Tabacalera del Este (known as Tabesa) has undermined global tobacco control efforts are sparking considerable attention in that country. One of the papers even calls out former Paraguayan president Horatio Cartes, owner of the company, for conflict of interest.

The papers, which review the history of transnational tobacco companies’ illicit cigarette trade via Paraguay, were published on Nov. 19 in Globalization and Health. Their publication comes just one month after the World Health Organization (WHO) protocol for eliminating illicit trade in cigarettes came into force. Such illegal activity undermines tobacco control efforts by increasing the affordability of tobacco products, leading to higher cigarette consumption and an increased incidence of tobacco-related illness and death. Cigarette smuggling also fuels corruption, undermines the rule of law, and causes governments to lose an estimated U.S.$40.5 billion per year in tax revenues.

SFU research associates Benoît Gomis and Natalia Carillo Botero, consultant Roberto Magno Iglesias, collaborator Philip Shepherd, and professor Kelley Lee, sifted through internal industry documents, mapped trade volumes and patterns using United States government and United Nations data. And they estimated cigarette production using trade flows from the United Nations Commodity Trade Statistics Database.

Their research is the first systematic analysis of the legal and illegal tobacco trade in Latin America via Paraguay.

Professor Kelley Lee, principal investigator

“This research exposes how transnational tobacco companies have been complicit in illicit trade in this region despite prosecution in several jurisdictions, and despite regional tobacco control initiatives and efforts by the World Health Organization,” says Lee, who is a Tier 1 Canada Research Chair and principal investigator for the study.

“Our findings confirm the need to better understand the factors influencing how the illicit tobacco trade has changed over time in specific regional contexts, and amid tobacco industry globalization.”

The researchers’ study reveals how Tabesa became the largest cigarette manufacturer in Paraguay by expanding its markets worldwide, largely through illegally trading and exporting billions of low-priced brands while expanding legally to the U.S. to fend off smuggling allegations.

“Tabesa has become a major supplier of illicit tobacco products across Latin America and increasingly beyond,” says Gomis. “Although Brazil continues to account for the bulk of Tabesa's revenues, our findings suggest the company continues to grow, in large part thanks to its complicity in illicit trade beyond the immediate region—including Europe and Asia.”.

“Tabesa’s continuing expansion is part of the ongoing tobacco industry globalization that has seen a growing role for aspiring transnational tobacco companies in some countries,” says Iglesias. “While attention to the global business strategies of leading tobacco companies is critical to global tobacco control, understanding the role of other actors will improve implementation of the World Health Organization (WHO) Framework Convention on Tobacco Control and its Protocol on Eliminating the illicit trade that came into force in October 2018.”

The WHO estimates that one in nine (11.6 per cent) cigarettes smoked worldwide is illicit.

Read the papers:

From transit hub to major supplier of illicit cigarettes to Argentina and Brazil: the changing role of domestic production and transnational tobacco companies in Paraguay between 1960 and 2003

“We think globally”: the rise of Paraguay’s Tabacalera del Este as a threat to global tobacco control