- Alcohol bans have been imposed by some local and national governments as part of the measures to contain COVID-19
- The illicit alcohol market already demonstrated a significant negative impact on the health of Latin Americans prior to the pandemic
- TRACIT urges local governments to lift measures restricting the legal sale of alcohol
NEW YORK, September 1, 2020 – The Transnational Alliance to Combat Illicit Trade (TRACIT) has indicated that the alcohol bans imposed by some local and national governments in Latin America have led to an increase in the illicit trade of alcohol in the region. This trend could aggravate the public health crisis in the Latin American region, where 15% of the alcohol consumed hails from the illicit market, according to figures from the 2018 study by Euromonitor International.
“It is truly alarming to see how the illicit trade in alcoholic beverages has spread across the countries of our region. Regrettably, the restrictive measures that have been introduced recently have yielded disappointing results: death, job losses and economic losses,” said Jeff Hardy, Director General of TRACIT. “We encourage governments to take a holistic approach when implementing public policies and to consider that draconian measures in terms of regulations and taxes generate negative impacts and propel illegal markets. In this period of economic recovery, it is necessary to account for all aspects of the illicit trade in alcoholic beverages, including health, tax, security, etc. It is important that governments implement measures that promote legal trade and the protection of formal employment,” said Mr. Hardy.
In addition to bans, other factors driving this serious problem include the lack of oversight of industrial ethanol production, price discrepancy between legal and illegal beverages (often motivated by an excessive tax burden) and insufficient resources for the persecution of those who commit these crimes.
The harmful effects of illicit or adulterated alcohol have already wreaked havoc in several countries around the world. For example, in India, at least 100 people recently died as a result of drinking illegally manufactured alcohol, while in Iran, at the end of April, more than 700 people died after consuming toxic methanol. This reality has also affected countries in Latin America where, by August, nearly 200 Mexicans have died this year due to the consumption of toxic adulterated alcohol, while in the Dominican Republic, 313 people have died in recent months due to the consumption of illegal alcohol.
To measure the impact of the problem in Latin America, Euromonitor International recently completed a study in which it determined that the illicit alcohol market is 22% in Colombia. According to Euromonitor, higher figures are presented in other countries of the region: 30.8% in the Dominican Republic, 29.2% in Ecuador, 26.2% in Peru, 22% in El Salvador.
Illicit alcohol harms not only consumers, however, but has a direct negative impact on the tax collection of each country in the region, resulting in a regional fiscal loss of US$1.693 million in 2018. As a consequence of illicit alcohol consumption, fiscal losses in the Dominican Republic amounted to US$262 million (2016), US$362 million in Mexico (2018), US$ 18.2 million in Honduras (2014), US$ 116 million in Ecuador (2018), US$ 678 million in Colombia (2019) and US$74 million in Peru (2017), according to figures from Euromonitor International.
If these governments were able to collect these revenue losses, by not enabling the growth of the illicit market, a large part of the efforts required for the economic recovery of Latin American countries from the COVID-19 pandemic could be financed, thus decreasing the need to adjust each country’s fiscal policies.
The Transnational Alliance to Combat Illicit Trade (TRACIT) is an independent private sector initiative to mitigate the economic and social damages of illicit trade by strengthening government enforcement mechanisms and mobilizing companies in the industrial sectors most affected by illicit trade.