Introduction and Overview
A report from the Colmex Seminar on Violence and Peace reveals that organized crime groups are increasingly involved in the illegal cigarette market, participating in both smuggling and distribution. These illicit cigarettes account for 20% of the national market, a figure that has risen from 18% in 2021.
The Scale of the Illegal Cigarette Market
Mexico sees approximately 70 million cigarettes consumed daily, with 14 million of these being illegal (20%). These illicit cigarettes are primarily imported into the country, with 90% of the illegal packs originating from six brands illegally imported from Emirates Arab Unified, Laos, Switzerland, India, South Korea, and China.
According to the report “Cigarros Ilegales y Crimen Organizado” by El Colegio de México, these illegal cigarettes are also produced in the states of Mexico, Campeche, and the Federal District.
Global Context of Illegal Tobacco Trade
Globally, 10-12% of annually consumed cigarettes are illicit, equating to an estimated 400-460 billion cigarettes per year. In Mexico, the illegal market’s share is higher, representing 20% of the national market.
Impact on Public Health and Fiscal Revenue
Evasion of Taxes
The report highlights that illegal cigarettes evade taxes, though the extent of this fiscal loss remains unclear. In 2016, according to former security expert Alejandro Hope, each illegal cigarette pack cost the Mexican government 27 pesos in lost revenue.
In 2017, COFEPRIS estimated that 340 million illegal packs were sold annually, generating a fiscal loss of approximately 9.18 billion pesos.
Economist Gerardo Esquivel explains that the government penalizes this consumption through additional taxes, aiming to discourage smoking. These taxes account for 160% of the original price.
Esquivel estimates that by 2025, the Mexican government will collect only 52 billion pesos in tobacco taxes. Given the size of the illegal market, the government could lose around 13 billion pesos in IEP taxes alone.
Health Risks
Illegal cigarettes lack control over their components, potentially containing toxic or unknown substances that increase the risk of cardiovascular and respiratory diseases, among others.
This adds to the burden on a public health system already facing severe shortages, exacerbated by the impact of these cigarettes on minors.
The report’s authors emphasize the urgency of laboratory research to analyze and compare the toxic content of various illegal cigarette brands with legal ones.
Organized Crime’s Role
The report underscores that organized crime’s illegal tobacco activities rely on continuous support from public officials at various levels.
The authors note a lack of information about customs’ efforts in seizing illegal tobacco.
They hypothesize a close relationship between the illegal tobacco trade and the criminal ecosystem, with delinquent groups exploiting their control over specific territories to import, manufacture, distribute, and sell this product.
This control extends to the sale of pirated items and counterfeit goods, facilitating the illegal marketing of non-illegal products in the informal market.
Implications for Policy and Future Research
Carlos Pérez Ricart, a CIDE researcher, considers the fact that one in five cigarettes smoked in Mexico is illegal to be a serious concern.
Given the public health, tax evasion, and security dimensions of illegal cigarette trade, Ricart argues that this issue should be addressed through a comprehensive state policy.
He notes that organized crime has diversified its criminal activities over the past 15 years, moving from drug trafficking to new markets like extortion, human trafficking, and cigarette sales.
