TOBACCO IS ONE of the most globalized industries on the planet. More cigarettes are traded than any other single product, some trillion "sticks," as they’re known in the business, passing international borders each year.
As a result, American brands have been propelled into every corner of the world, with just four companies controlling 70 percent of the global market. Marlboro, Kool, Kent: they have become as omnipresent around the world as they are here in the United States. With declining sales in this country, foreign markets have become increasingly critical to the tobacco companies’ financial health: the top US tobacco firms now earn more from cigarettes sold abroad than in the United States. How they got there is a tale that leads straight into a global underground of smugglers and money launderers who have played a key role in facilitating the tobacco companies’ entry into foreign markets.
A six-month investigation by the Nation, the Center for Investigative Reporting, and the PBS newsmagazine show NOW with Bill Moyers (which aired its investigative report on April 19) has unpeeled the many layers of a complex distribution system for a multi-billion-dollar trade in smuggled cigarettes. Twenty-five percent of exported cigarettes, according to the World Health Organization (WHO), are smuggled. Smuggling has enabled multinational tobacco companies to increase sales volume dramatically by evading local tariffs and competing head-to-head with domestic producers, thereby helping to establish internationally recognizable brands.
Smuggling has landed the tobacco companies in US court. Lawsuits filed by European and Canadian governments and Colombian state governments against Philip Morris and British American Tobacco (BAT, Brown & Williamson’s British-based parent company) have highlighted the companies’ alleged links to smugglers and money launderers. Documents released as a result of the historic $200 billion–plus settlement with US state attorneys general in 1998 also provide a glimpse into the way the companies devised advertising and distribution strategies that helped fuel the market for smuggled cigarettes. The companies stand accused of violating the Racketeer Influenced and Corrupt Organizations Act (RICO), defrauding governments of hundreds of millions in tax revenues, and hiding and ultimately taking the illicit profits back to the United States, which constitutes money laundering.
As the cases were unfolding just one month after the September 11 terrorist attacks, the tobacco companies — with support from the White House — fought back in US Congress, where they took advantage of the nation’s distraction to win changes in the USA Patriot Act in a brazen effort to shield themselves from liability. But their headaches have not gone away. The cases are still winding through the courts, and the companies’ attempts to evade accountability are the focus of growing international outrage.
Underground in Colombia
I went to Colombia, a country infamous for smuggling exports to the United States, to see how the flip side of that equation — smuggling from the United States to Colombia — has worked for more than a decade.
The journey from the main tobacco hubs in the United States to Colombia is circuitous, a route designed for ease of smuggling rather than ease of transport. From the modern, state-of-the-art ports of Wilmington, North Carolina, and Miami, huge cranes lift pastel-colored containers loaded with 10,000 kilos of cigarettes apiece onto cargo ships with the routine rhythms of oversize insects. By the end of their journey at Colombia’s La Guajira port of Portette, after transiting through the free zones of Panama and Aruba, the containers might as well have traveled back in time. The bawdy port is what one anthropologist who has studied the region calls a "phantom town" — it’s not included on maps of the country and has had, until recently, few connections to the official structures of the Colombian government.
The hot, sparsely populated province of La Guajira, which sticks out of Colombia’s Caribbean coast like a thumb, is home to one of the country’s strongest indigenous tribes, the Way’uu. Last winter, when I visited, torrential rain knocked out the bridge between Santa Marta and Barranquilla, making coastal travel impossible. The road through the Sierra Nevada mountain range between Riohacha — the provincial capital on the coast — and Valledupar, the closest major city in the interior, runs through territory disputed by the ELN guerrilla movement and right-wing paramilitary groups. For parts of the year, the only way into La Guajira is by air or boat.
Colombia’s other Caribbean ports, Santa Marta and Barranquilla, host sophisticated trucking and railroad depots right on the docks that are designed to facilitate the movement of large quantities of duty-paid cargo into the Colombian interior. Portette has no such facilities. It is a port designed, quite literally, for smugglers — and it’s here that the schooners and creaky old ships from throughout the hemisphere pulled into Colombian waters with their crates of Johnnie Walker and Old Parr, name-brand sound systems and electronic appliances, bales of textiles, and those telltale cartons of Philip Morris’s Marlboro and Brown & Williamson’s Kool.
From Portette, trucks travel for two hours over a single rutted, mostly dirt road to the town of Maicao, a dusty outpost of weather-beaten shop fronts and mud-splattered stucco buildings. In Maicao, young men are perched on stools along the side of the road amid plastic containers full of gasoline — skimmed from Venezuelan tankers and sold at a tax-free discount. Above them, a sign looms in peeling blue and yellow paint: WELCOME TO THE COMMERCIAL HUB OF COLOMBIA. Maicao has for decades been the primary transit center in La Guajira for contraband headed for Colombian markets. The sight of brand-name whiskies, stereos, shampoos, car parts, and cigarettes provides a jarring contrast to the muddy streets and crumbling kiosks where many of these products are sold.
Maicao’s 70,000 inhabitants are divided between the Way’uu and a population of Middle Eastern immigrants — Colombians who emigrated from Lebanon, Syria, and elsewhere in the Middle East. Historically, the Way’uu and the Turkos — as those with Middle Eastern roots are known — have divided the contraband trade between them. The mostly Muslim Turkos trade in textiles, appliances, and other consumer products, leaving the vices of alcohol and cigarettes to the Way’uu.
But the Way’uu do not perceive themselves as criminals in any sense of the word. Since Colombia passed a new constitution in 1991, decentralizing federal power, the tribe has been in charge of most of La Guajira; the bulk of the state is a reserva indigena, in which they enjoy a limited form of autonomy. From the Way’uu perspective, they are merely traders — their main economic activity for centuries.
"Asi es la vida," says Francisca Sierra, a Way’uu community leader and trader in Maicao, shrugging her shoulders as she explains the tribe’s long-time role as renowned smugglers. That history predates even the formation of modern-day Colombia, which revolted against the Spanish in 1814. It was the Way’uu and ranchers in Santander province who helped spark the rebellion, when they refused to pay taxes on cigarettes and coffee imposed by the Spanish — Colombia’s own Boston Tea Party. For 300 years, the Way’uu have facilitated the entrance of foreign products into Colombia below the noses of the national authorities.
In the last decades of the 20th century, the Way’uu of La Guajira became a critical link in a chain of commercial relationships stretching from the tobacco farms of the Southeast United States to corporate boardrooms in Louisville, New York, and London, to tax havens like Aruba and Panama, and on into the interior of Colombia. Maicao itself is part of a special free-trade zone, but once goods leave that zone, they become contraband. The Way’uu were the ones who unloaded the ships in Portette and then drove the trucks south out of Maicao into the interior, providing Philip Morris and BAT a detour around the tariffs that once made Colombia one of the more restricted markets in Latin America. The Federation of Colombian Departments, representing the country’s state governments, estimates that the cigarette contraband cost them more than $500 million in tax revenues over 10 years — revenues that would have paid for social projects like education and health care, including treatment for the health effects of smoking.
Statistics compiled by Roberto Steiner, an economist and director of the Center for the Study of Economic Development at the University of the Andes in Bogot‡, indicate how smuggling served the tobacco companies’ long-term interests. The boom in cigarette smuggling into Colombia in the 1990s, according to Steiner, coincided closely with Philip Morris’s emergence as the dominant player in Colombia’s cigarette market. As the companies sold tax-free cigarettes at prices comparable to those of Colombia’s homegrown brands, smokers in Bogot‡, Cali, Medell’n, and elsewhere throughout the country became accustomed to "prestigious" imports like Philip Morris’s Marlboro, Brown & Williamson’s Kool, and BAT’s Kent. From 1984 to 1993, says Steiner, the number of cigarettes illegally imported into the country quadrupled. Meanwhile, domestic cigarette producers’ share of total cigarette sales dropped from an 85 percent market share in 1984 to just 30 percent in 1993. Colombia used to have a thriving domestic tobacco industry, but since 1984 the number of hectares devoted to tobacco crops has plummeted. As the domestic cigarette industry imploded, many tobacco farmers made the shift to Colombia’s far more famous addictive crop, coca.
