Brazilian Government closes more plants…………………

The Brazilian tax authorities shuttered Phoenix – an independent cigarette producer in Sao Paulo – last Wednesday, July 16.

This makes five independent plant closings in 14 months – American Virginia’s Rio plant, Sudamax near Sao Paulo earlier this year, Cibahia in Sao Paulo a few months ago and Cibrasa in Rio around the same time, representing an annual volume of around 20 billion cigarettes.

If the taxes truely were not being paid you may be pleased but in Brazil it is not that simple.

The lost volume will not be recouped by the Brazilian Government but will be picked up by the many Paraguayan producers who’s product manages to arrive in Brazil – despite efforts to prevent them.

85% of Brazil’s cigarette price is taxes; so it is easy to see this represents about 2.5 billion Reais (or almost $1.6 billion.)

In this case the only viable way to reduce the contraband entering Brazil is to moderate the tax difference. You can increase the cigarette tax in Paraguay (already it contributes 10% to Paraguay’s gross tax receipts) or reduce it in Brazil.

The remainder of Brazil’s independents are probably feeling a little nervous right now – after all who’s next?


#1 Mike Harmon on 07.22.08 at 11:37 AM

I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

#2 Pablo Gutierrez on 07.23.08 at 7:46 AM

Brazilian companies are being closed for events that happened some years ago.

The contol systems they have now,won`t allow any production of cigarettes without tax,as the tax authorities installed a production controller on each machine and the invoices are issued eletronically.

The problem is that the past debts of each of them amounts to such huge sums,that even paying them on a long term,by means of bi-lateral agreements or via some plans established by the government(Refis),the operations are completely unfeasible.

#3 Sunshine on 07.13.11 at 10:59 AM

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