The Latin American tobacco threat

Gavin Lipsith

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As the Latin American industry prepares to celebrate the tenth anniversary of trade association ASUTIL at this year's conference in Buenos Aires, the threat to the region's duty-free tobacco business is as strong as ever, says global campaign coordinator Keith Spinks

Latin America welcomed a peculiar group of tourists alongside its traditional stream of visitors from US and Europe this July. While many people were taking their annual holidays the Network for Accountability of Tobacco Transnationals, a powerful conglomerate of US anti-tobacco organisations, set out on its Latin American Treaty Ratification Campaign—a three-week tour promoting the World Health Organization's Framework Convention on Tobacco Control (FCTC). Armed with the objective of pushing forward the global treaty, the group met with ministers and tobacco control organisations in countries where they saw the process as being stalled, urging immediate action.

Whether or not the clause recommending countries to further restrict duty-free tobacco sales was a point of discussion, the tour was an unwelcome reminder that Latin America remains a focus for the anti-tobacco lobby. And, says the duty-free industry's global campaign coordinator Keith Spinks, with taxation issues high on the FCTC agenda many countries could take a look at duty-free as part of their implementation process.

The latest campaign focused on three key countries—Brazil, Ecuador and Costa Rica—which are all supporters of the treaty but have yet to ratify. Chile, Honduras, Mexico, Panama, Peru and Uruguay have already ratified the treaty, while Columbia and the Dominican Republic did not sign off the final text and are unlikely to lend their support.

Spinks says: "There is not necessarily an immediate threat to duty-free sales as there is in some Asian countries, but there are certainly issues surrounding taxation that countries will examine as part of the treaty's implementation. Many countries may look at duty-free as one step in the process."

The region's retailers are already facing pressures on the tobacco category. In Brazil graphic health warnings have been displayed on packs and cartons for a few years already, and while duty-free stores are currently exempt, the government may review its position when it comes to implements the FCTC. More recently the Uruguayan government has announced it will shortly introduce warnings covering half the surface of cigarette packs. The country's travel-retail industry and tobacco suppliers are working to find out whether the decision applies to tobacco sold in duty-free stores.

At last year's ASUTIL conference the industry campaign gained an important boost when the association's board committed itself to prioritising the tobacco campaign. Says Spinks: "We had a lunch meeting with the board and ASUTIL members, and the board stated its support for the campaign and said it was keen to keep abreast of developments in the region. It also requested support from tobacco companies in gathering information. The recent success in pushing for allowance increases shows that ASUTIL has its finger on the pulse, and while many of the retailers have good contacts with authorities, brand owners can also be helpful in keeping an eye on potential threats."

Unfortunately the industry has not always been so proactive in monitoring policies. In the embattled Asia/Pacific region, for example, there have been many occasions where the trade has learned about potentially damaging legislation through media reports. Most recently a report on changes to Vietnam's health policy included a statement that the government had decided to increase tax on tobacco by 60%, as well as implementing a ban on the sale of tobacco products at the country's duty-free stores at airports and borders. Spinks is in contact with dominant Vietnamese travel retailer Imex Pan-Pacific to find out whether the move has already been passed and how the industry can defend sales, but he is angry that yet another threat has been discovered through the media.

"My strongest message to regional associations is that they must become involved in the policy process," he says. "Ideally threats should not be publicised in the local press as that only serves to draw attention to them. We should aim to enter negotiations with governments and ministries as soon as we hear they are considering restrictions, and the first that newspapers should hear of it is when we have successfully removed the threat."

The European Travel Retail Council, of which Spinks is secretary-general, is a good model of a trade association integrating itself into EU policymaking. In its first year of activity the association has used its influence to achieve several amendments to potentially damaging legislation and Spinks would like to see other associations, including ASUTIL and the fledgling Asia Pacific Travel Retail Association, take a similar role in the tobacco campaign. His counterpart at ASUTIL, José Luis Donagaray, has been in regular contact about the threat in Uruguay and the Latin American Treaty Ratification Campaign.

"While the tobacco companies can help in providing information the Latin American campaign, as far as it concerns duty-free sales, has got to be fought by ASUTIL," says Spinks. "I would like to see the association taking an active role in co-ordinating the campaign here and so far it seems keen to take on that responsibility."

Spinks is at ASUTIL 2005 to meet with board members and to discuss how retailers can support the campaign. One issue that is always near the top of the agenda is fundraising. Spinks reveals that the campaign has enough funds to finance the objectives it has set for the next two months, although the nature of the threat means that this could change rapidly.

"If a new threat emerges then it would certainly strain our budget if, for example, I have to fly to Vietnam and spend a few weeks there co-ordinating the campaign. We always need more funding, and although we have recently gained some strong retailer members—including The Nuance Group and Dufry Group—through national associations, it would be good to see more companies providing actual financial aid for the campaign. That is one of the things I hope to impress on people during the ASUTIL conference."

Given the vital role that tobacco sales play in the duty-free industry, both as a penetration driver and a source of income in their own right, the region's retailers and anyone involved in Latin American trade would be foolish to ignore the threat to tobacco.

Keith Spinks is attending ASUTIL 2005 and can be contacted at spinks.etrc@wanadoo.es or on tel: +34 687 529 528.