Coronavirus Lockdown Boosts Demand for Contraband Cigarettes in Chile

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The sophisticated theft of a cigarette shipment has put Chile’s worsening contraband cigarette crisis on display, which has been exacerbated by the coronavirus pandemic.

On July 17, assailants in 10 vehicles used GPS inhibitors and road spikes to corner two trucks carrying large shipments of Chile Tabacos cigarettes in Cerrillos, a suburb to Santiago’s southwest, La Tercera reported.

Twenty or so individuals left one truck untouched but commandeered the second truck, taking the driver with them. When authorities later located the truck, they found that the assailants had stolen 1,071 boxes of cigarettes, valued at just over $390,000. The driver was left unharmed. As of July 23, authorities have yet to make any arrests related to the incident.

According to figures collected by Chile’s Unit for Criminal Analysis and Investigative Focuses (Unidad de Análisis Criminal y Focos Investigativos – SACFI), this type of crime has surged by 227 percent from January to June 2020 compared to the same period last year. This notable increase has been caused by assaults in Santiago’s suburbs of Maipú and Cerrillos.

Citing these numbers, the Western Regional Prosecutor’s Office announced July 20 the opening of a new line of investigation into these types of coordinated cigarette robberies.

SEE ALSO: Chile News and Profile

Meanwhile, several recent seizures of contraband cigarettes by authorities illustrate where last week’s stolen cigarettes are likely to end up — for resale on illicit markets.

On June 29, authorities seized 16,200 cartons of contraband cigarettes in Coquimbo, valued at more than $780,000. And on July 17 — the same day as the cigarette heist in Cerrillos — police intercepted 1,860 boxes of contraband cigarettes near Santiago’s city center.

According to a recent report published by KANTAR, a research group contracted by the Illicit Trade Observatory and British American Tobacco Chile, the country’s illicit cigarette market has grown to constitute 23.3 percent of Chile’s total market — a share that has increased more than six times over since 2012.

Like in most Latin American countries, the illicit cigarettes were primarily imported from Paraguay — a global leader in cigarette production — though a considerable portion was South Korean in origin, according to the report.

InSight Crime Analysis

Chile’s thriving contraband cigarette market is driven by three elements: the high price of legal cigarettes, drug trafficking groups with well-established infrastructure entering this lucrative criminal economy and, most recently, changing consumer demands during the coronavirus pandemic.

Firstly, Chile puts high tariffs of more than 50 percent on cigarette imports. According to the KANTAR report, the resultant price differential between licit and illicit cigarettes — with the former being on average nearly twice as expensive as the latter — constitutes “buyers’ primary motivation for seeking out the illegal product.”

The coronavirus pandemic, which has wreaked worldwide economic havoc, has also affected demand dynamics.

“One aspect to consider is that, faced by the economic recession caused by the coronavirus, important sectors of the population are going to try to mitigate poverty by buying far more products on informal and street markets, which will drive up contraband of all types,” Juan Pablo Toro, director of the Chilean security think-tank AthenaLab, told InSight Crime.

SEE ALSO: Chile Sees Drug Trafficking as Most Severe National Security Threat: Survey

These dynamics have caused criminal groups to diversify their operations, moving goods that might not be as profitable as drugs but that are more reliable, Toro added.

Consumer openness to illicit products — 89 percent of consumers interviewed by KANTAR said they knew their cigarettes were contraband — incentivizes criminal groups to involve themselves in the trade by pulling stunts like the Cerrillos robbery. The sophisticated nature of that attack suggests that those involved run other illicit operations concurrently.

According to Toro, it is common for Chilean criminal groups to use cigarette trafficking as a low-risk way to test the water.

“If the shipment is intercepted by authorities, they don’t lose as much money as if it were drugs. And if the shipment passes, they not only earn something from the cigarettes, but they also test how trustworthy that route is for trafficking,” Toro wrote.

The pandemic has also nurtured the contraband cigarette trade in places like Argentina, where the closing of factories has led to a shortage of licit cigarettes. Like in Chile, many of those illicit cigarettes are smuggled in from Paraguay, which in 2016 accounted for nearly 75 percent of the illicit cigarettes found in 16 Latin American countries, according to Foreign Affairs.

Though the Chilean government has vocalized its intent to crack down on cigarette-related crimes, it’s likely that the contraband market will continue to thrive for as long as the demand-side dynamics remain the same.

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