Four billion reals are said to escape Brazilian tax authorities every year due to a lack of surveillance around these contraband products.
The amount of cell phones sold illegally in Brazil has more than doubled in just one year, claims the country’s Association of Electronics Manufacturers (Abinee), according to a survey carried out by market research firm IDC.
Data published last Tuesday reveals that the number of illegal handsets rose from 10% of the total cell phone market in Brazil in 2022 to 25% in the last quarter of 2023, closing the year with a total of 6.2 million phones sold illegally.
Abinee estimates that 90% of all smartphones smuggled into Brazil are sold for 38% less than official market prices. The Xiaomi Redmi Note 12 emerges as the reigning champion of this black market, selling for up to half its market price via illegal channels.
800 million dollars in tax evasion
As a result, 4 billion reals (just under 800 million dollars) escape Brazilian taxation every year. “The Brazilian model facilitates the sale of illegal products: it allows certain retailers to evade checks,” said Humberto Barbato, president of Abinee, at a press conference on Tuesday.
Mercado Livre, Latin America’s largest e‑commerce site, said it was acting “proactively” to prevent attempts to misuse its platform, as reported by daily Globo.
“As soon as an irregular product is identified on the platform, the ad is removed and the seller is warned, and may even be permanently banned,” the company said in a statement, recalling that it regularly collaborates with Anatel, Brazil’s national telecommunications agency, to combat the marketing of irregular goods.
Amazon, for its part, stated that it contractually requires all products offered on the site to have the necessary licenses, authorizations, certifications, and approvals, as well as declarations attesting to their compliance with applicable laws.
“Any failure to comply with these contractual obligations may result in the suspension and interruption of sales, the consequent destruction of any existing stock in Amazon distribution centers without the right to refund, as well as the blocking of sellers’ accounts,” the company said.
Illegal equipment mainly produced in China
“Border controls are not sufficient to curb this smuggling phenomenon, which is getting worse every year,” lamented Humberto Barbato. “Consumers are the biggest losers, as they face safety risks and find themselves without technical assistance: our authorities need to take more drastic measures,” he added.
Abinee was also keen to remind consumers that these illegally imported devices are not certified by the National Telecommunications Agency (Anatel) and therefore not subject to safety or functional tests. It is therefore impossible to determine the proportion of counterfeit products in these illegal sales.
And even if military police operations regularly occur in the country, the flow of goods into this black market remains unabated. The operation enabling these products to reach Brazil is complex, and smugglers regularly change their routes.
According to the National Forum against Piracy and Illegality (FNCP), illegal equipment and counterfeits are mainly produced in China. From there, to bypass controls, they are often sent to other South American destinations, mainly Paraguay, Bolivia, Guyana, French Guiana, or Suriname, before entering the country.
Products from Guyana, French Guiana, and Suriname enter Brazil via the northern rivers, usually landing at the port of Belém in Pará. Goods landing in Bolivia or Paraguay arrive by road.
An activity similar to drug trafficking
“The export of counterfeit goods and the global supply of illegal products are comparable to drug trafficking. It’s an extremely profitable business, in which international gangs make a lot of money,” explained Richard Fernando Amoedo Neubarth, customs delegate for Brazil’s Federal Service in the port of Santos, to CNN in 2021.
“Here at the Port of Santos, we have 15 scanners and receive images in real-time. From the port’s operations center, our image analysts can identify counterfeit goods,” explains Neubarth.
In São Paulo, 15,000 tonnes of goods pass through the port of Santos every year: the customs agency inspects over 800,000 containers a year. Given the volume of goods, the Brazilian authorities use a computerized system to identify ships that present a high risk of containing illegal products, but they can only inspect a fraction of the shipping containers.
Consequently, the port has become a hub for smuggling, and these networks employ a range of different tactics to smuggle their goods into the country.
According to an investigation by the Brazilian media Folha, smugglers not only fill containers with contraband in the hope that it will go unnoticed, but they also replace high-value products with low-value ones at the port. They rapidly unload containers of electronic goods on arrival, replacing them with ping-pong balls, for example. By the time the customs authorities inspect the cargo, the electronics have long since disappeared without a trace.
The consequences of illegally imported products on the country’s economy are severe, and legislation sometimes also makes it difficult to combat counterfeiting. In many cases, the affected brand must provide a certificate of inauthenticity or request that the court seize the illegal merchandise intercepted by the authorities. If this is not done, the merchandise continues its path and will be placed on the market.
