Venezuela’s largest cigarette producer, Bigott, has sounded the alarm over a rapid rise in illegal cigarettes being used in the country, with authorities not seeming in a rush to try and crack down on the trade.
By Insight Crime
Oct 17, 2022
Contraband cigarettes accounted for 44% of all tobacco sales in Venezuela, according to Bigott’s head of legal affairs, Miguel Benzo, in an interview with the Venezuelan newspaper Tal Cual published in early October.
“Historically, we dealt with contraband levels of below 10%. That was relatively acceptable and we could live with it,” said Benzo.
But Venezuela’s worsening economic crisis has seen the market share of contraband cigarettes rapidly increase. In 2019, Bigott reported that 21.35% of all cigarettes sold in the country were of illicit origin, a total which increased to 30% in 2020.
In April, the Venezuelan Senate allowed Bigott to lower its prices by 25% to better compete with contraband cigarettes, said Benzo in a separate interview with Bloomberg.
But this has not been enough.
According to one Bigott employee, who spoke to InSight Crime anonymously, the company has found 127 cigarette brands illegally being sold in the country, including some coming from Colombia, Paraguay, China, India, and the United Arab Emirates.
This indicates a diversification in the ways cigarettes are entering Venezuela. Before this explosion, contraband tobacco either entered the country by land from Colombia or by sea from Aruba, said Benzo.
Now, however, most cigarettes enter the country at ports and airports through courier services, according to an investigation by Tal Cual. These services offer “door-to-door” delivery for both private individuals and companies.
And while products such as cigarettes are ordinarily banned from such imports, due to the norms surrounding their sale, owners of contraband tobacco are allegedly paying between $50,000 and $100,000 per shipment to corrupt officials.
As in much of Latin América, cigarettes are a source of significant tax income to Venezuela. Yet few steps have been taken to address the growth in sales of illegal cigarettes.
According to data from Bigott, 73% of the revenue drawn from legal cigarette sales goes to the government in taxes. However, that potential tax income has dwindled in recent years, as illegal cigarettes have rapidly eaten away at the legal market share.
Apart from occasional seizures, there has been a lack of coordinated action by authorities to crack down on this illegal market. According to one Venezuelan economist, who spoke to InSight Crime on condition of anonymity, the Venezuelan government is not overly concerned about the loss of tax revenue as this money is made up for in other ways.
“Those who bring contraband cigarettes to Venezuela are part of corruption networks that have been adjusted to benefit authorities. The tax collection in the country doesn’t matter, so long as the money arrives,” he explained.
“Why doesn’t the state do anything? Because these people are part of the network,” he added.
The economist added, however, that the profits of those corrupt officials taking part in contraband rings are the only ones benefiting. National tobacco producers have been left at a loss due to this unfair competition, he said. Consumers are also being affected as contraband cigarettes do not match the Venezuelan government’s standards of quality.
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