tocacco plant Native American Tobaccoo flower, leaves, and buds

tocacco Tobacco is an annual or bi-annual growing 1-3 meters tall with large sticky leaves that contain nicotine. Native to the Americas, tobacco has a long history of use as a shamanic inebriant and stimulant. It is extremely popular and well-known for its addictive potential.

tocacco nicotina Nicotiana tabacum

tocacco Nicotiana rustica leaves. Nicotiana rustica leaves have a nicotine content as high as 9%, whereas Nicotiana tabacum (common tobacco) leaves contain about 1 to 3%

tocacco cigar A cigar is a tightly rolled bundle of dried and fermented tobacco which is ignited so that its smoke may be drawn into the mouth. Cigar tobacco is grown in significant quantities in Brazil, Cameroon, Cuba, Dominican Republic, Honduras, Indonesia, Mexico, Nicaragua, Sumatra, Philippines, and the Eastern United States.

tocacco Tobacco is an agricultural product processed from the fresh leaves of plants in the genus Nicotiana. It can be consumed, used as an organic pesticide, and in the form of nicotine tartrate it is used in some medicines. In consumption it may be in the form of cigarettes smoking, snuffing, chewing, dipping tobacco, or snus.

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Filling Big Tobacco’s Shoes

Paraguayan cigarette manufacturers like to point out that they are just filling a void created by large multinational tobacco companies. In the 1990s, British American Tobacco and Philip Morris ran independent schemes in which their subsidiaries in Brazil and Argentina legally exported billions of cigarettes to Paraguay. The sticks were then smuggled back to these two higher-tax countries and sold on the black market. The practice ended in 1999 when the Brazilian government raised the cigarette export taxes dramatically to discourage the illegal trade. Following the tax increase, dozens of cigarette factories opened in Paraguay, many of them owned fully or in part by Brazilians. Within three years, Paraguay was home to more than 30 cigarette manufacturing plants, some of which counterfeited well-known international brands.

The local counterfeiting business has dropped markedly in recent years as cigarette makers realized that there was a market — in Brazil and around the world — for the cheap Paraguayan brands. The practice also carries less risk of being pursued by Big Tobacco companies for trademark violation. Today the number of manufacturing facilities has more than halved, but not so production.

Paraguay’s top cigarette factory, a modern, sprawling 183,000 square-foot facility that can pump out up to 1.5 billion cigarettes a month — or 579 cigarettes per second. The factory, located a short drive north from Ciudad del Este in the city of Hernandarias, supplies almost half of the Paraguayan market with its two flagship brands, Kentucky and Palermo. But at the same time as it serves a legitimate market, the company allegedly supplies large quantities of cigarettes that end up smuggled to Brazil and Argentina. Customs officials in those two countries told ICIJ they seize more contraband cigarettes from Tabesa than any other Paraguayan company. In 2006, Tabesa was mentioned in Operation Fireball as one of the factories whose cigarettes were allegedly smuggled to Brazil.

Paraguayan businessman Horacio Manuel Cartes is widely reported to be the owner of Tabesa, and is listed as a top shareholder and director by Informconf, a Paraguay business database. Cartes started as a cigarette distributor two decades ago. Since then he has built an empire that includes a bank, a soccer club, and several agricultural ventures — some of these formally owned by family members and business associates.

Tabesa’s CEO José Ortiz talked to ICIJ reporters about the company’s business.

“We don’t know where our cigarettes are consumed, and it’s not our problem,” said Ortiz when asked about the presence of Tabesa’s cigarettes in Brazil and Argentina, two markets to which the company does not legally export. “We sell our products in Paraguay and pay all local taxes,” he added, sitting in his office at Tabesa’s manufacturing plant, which features high-end German cigarette machinery. What happens once the cigarettes leave the factory is not Tabesa’s responsibility, said Ortiz, a view shared by other cigarette makers in Paraguay. “My job is to supply the market.”

Ortiz said that Tabesa does not sell directly to vendors but rather to four or five wholesale distributors. He named two wholesale firms, one of which, Tabacos del Paraguay, is affiliated with Tabesa. “The rest, I don’t remember,” he said, reclining on his large black leather office chair and switching the focus to multinational tobacco companies: “They are the parents and the grandparents of the creature,” said Ortiz of BAT and Philip Morris’ smuggling in the 1990s. “We are replacing that market they abandoned.”

Last year, the company broke into the U.S. market with its Palermo brand and is now certified to sell in at least eight states, including Maryland and California . Palermo is also available online through websites selling cigarettes from Indian reservations in New York, but Ortiz denied that Tabesa is selling to Native Americans directly. U.S. officials have identified New York reservations as major hubs for cigarette smuggling.
Guaíra: No Man’s Land

Brazilian prosecutors and police place the Paraguayan factories at the top of the “criminal enterprise,” which they say runs high-volume cigarette smuggling in the region. Érico Saconato, head of the Brazilian federal police in Guaíra, said that the factories work hand in hand with “managers” on both sides of the border who acquire trucks and boats, bribe public servants, and hire scores of youths, fishermen, and farmers to transport the cigarette loads. In one of the cases involving Silveira, prosecutors said in court documents that the ring acquired large quantities of contraband cigarettes “directly from the Paraguayan factories” for distribution in Rio Grande do Sul and border cities of Argentina.

Roque Silveira’s hometown of Guaíra gained prominence in the cigarette trade when controls tightened in the Tri-Border Area, starting in 2005. Today large portions of the population there, Guaíra officials say, rely on smuggling for their livelihood, whether it’s renting space in their homes for the smugglers to store their loads, working as lookouts, or passing cigarettes across the Paraná River. The “paseros,” or crossers, make about $300 a week, one and a half times the minimum monthly wage in Brazil.

Police in Guaíra say they feel overwhelmed. Saconato says 700 people were arrested in 2007 in connection with smuggling, yet only two men were convicted. When the district attorney shut down a riverside bar, Tininha’s, which allegedly was widely used by smugglers to plan their business, a federal prosecutor reversed the order and sued the city. That night smugglers celebrated by launching fireworks on the riverside, officials say.

“Guaíra is practically abandoned,” says Saconato, who anticipates record cigarette seizures this year due to the global financial crisis and a recent rise in cigarette taxes in Brazil. In the kiosks of Sao Paulo or Rio de Janeiro, the cheapest Brazilian cigarette pack (valued at roughly $1.50) costs three times as much as the contraband Paraguayan brands.

“A Big Duty Free Store”

No policeman in Guaíra has seen Silveira in recent years, Saconato says. He has become a mythical character of sorts, with town residents claiming from time to time to have spotted him. His 1996 murder case is still meandering through Guaíra’s courts. After Operation Fireball, Silveira became a ghost, Brazilian police say, but no one believes he has retired from the cigarette trade. Some of Silveira’s former associates now manage large portions of the smuggling on both sides of the border, according to Brazilian police.

The latest traces of Silveira in Paraguay’s courts are from July 2007, when he beat the legal system again. On that occasion, Paraguay’s Supreme Court denied an extradition request by Brazilian prosecutors who accused him of conspiracy, cigarette smuggling and money laundering.

Just the mention of Silveira’s name in Paraguay’s tobacco circles raises eyebrows and causes interviewees to clear their throats repeatedly before offering a noncommittal “His name sounds familiar,” or “Didn’t he own a cigarette factory around here?”

One man in Salto de Guairá, a Paraguayan city located just across the river from Guaíra, is not hesitant to talk about Silveira. Sidronio Talavera, a professional harpist who once played with one of Paraguay’s most famous bolero bands, sits in a small office from where he manages his cigarette factory, Cosmopolita S.A. The facility is rather old and the cigarette-making machines are housed in a warehouse across a dirt yard from Talavera’s office. A truck was picking up cigarettes at the factory the afternoon ICIJ reporters visited in March. Talavera says he not only knows Silveira, he is also his business associate. “He is one of the nicest people I have ever met,” beams Talavera, who was convicted last year of tax evasion. Paraguayan prosecutors accused Talavera of reporting fake cigarette exports to Brazil in order to avoid paying taxes on imported cigarette manufacturing supplies. He has also been fingered by Paraguayan officials as a counterfeiter, a charge he denies.

Paraguayan manufacturer Sidronio Talavera says he doesn’t care if his cigarettes end up being sold on the black market. “I care that I sell,” he says. Marina Walker Guevara/ICIJTalavera says he sells to anybody who knocks on his factory’s door, and he’s well aware that some of the buyers are smugglers or work with smugglers. “Good for them if they send the cigarettes to Brazil,” he says slapping his hands down on his desk. “If I have too many requirements, I will starve.” Talavera boasts that his Latino cigarettes have found a market as far away as Dubai. He says that wholesalers based in Panama buy from him and then ship the cigarettes overseas. “I don’t know if from Panama they are smuggled elsewhere or re-sold legally, and I don’t care. I care that I sell.”

As for Silveira, Talavera says he is still the trade’s big intermediary, the middleman who acquires large quantities of cigarettes from the Paraguayan factories and arranges the deliveries in Brazil. “He works with everybody!” he says when told that other cigarette makers seem oblivious these days to Silveira’s whereabouts. “He is smart, the Mafioso. He fooled the Americans,” says Talavera.

As things stand, the Paraguayan government, which says it’s determined to bring the cigarette industry under compliance, has its work cut out for it. Ortiz, Tabesa’s CEO, put it simply. “Paraguay is like a big duty free store,” he said. “And it’s a great deal.”

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1 comment to Filling Big Tobacco’s Shoes

  • mary

    Why Have I heard that Palermo cigarettes are banned in the usa .?
    What is the problem with cigarettes from other country’s/
    I have smoked palermo so has alot of people .Some cigarettes are even made in africa india .please reply .thank you

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