Selling tobacco to cigarette manufacturers such as Tabesa and Uriom — owners of the Paraguayan brands most frequently smuggled into Brazil — is not illegal. The practice, however, contradicts the industry’s claim that it is harmed by the illicit trade.
Tobacco magnate Horacio Cartes, president of Paraguay from 2013 to 2018, has a notorious reputation. Owner of Tabacalera del Este (Tabesa), the country’s leading cigarette manufacturer, Cartes also holds a 17% share of the Brazilian tobacco market despite not having products legally registered in Brazil, according to industry data. Listed by the 2003 CPI (Congressional Inquiry Commission) on Piracy as one of the links in tobacco smuggling, his company was even sued in 2011 by the former Souza Cruz, now BAT, which accused it of “unfair competition.” In an initial ruling, the judge in the case stated that it was a “well-known fact” that Tabesa floods Brazil with its cigarettes.
Even so, at least 10 Brazilian exporters sold nearly 140,000 tons of tobacco to Tabesa between 2008 and 2023, according to data obtained by Joio through ImportGenius, a platform that collects information on global trade. The volume is enough to manufacture up to 10 billion packs of cigarettes. In total, Brazil supplied more than half of the leaf tobacco purchased by the company during the period. According to 2022 data from the tobacco industry itself, one of Tabesa’s brands, Eight, was the second most smoked brand in the country, while another, San Marino, ranked eighth, both without registration with Anvisa. This means that Brazilian tobacco may be supplying illegal products.
“In 2008, it was already known that selling to Tabesa meant selling to smugglers because the company always included manufacturing information on the packs, as well as Paraguayan health warnings, and then those packs were found all over the continent,” says economist Roberto Iglesias, a former consultant to the World Health Organization (WHO). “Obviously these suppliers know that Cartes would manufacture cigarettes that would illegally enter Brazil.”
The main tobacco exporters to Tabesa were Tabacos Marasca, a tobacco company based in Venâncio Aires (RS), and Premium Tabacos, from Santa Cruz do Sul (RS). Together, they account for one out of every four tons sold by Brazil to Cartes’s company, according to the data analyzed in the report. Alliance One, China Brasil Tabacos, Universal Leaf, ATC, Brasfumo, UTC, HT Agro, and Prime Leaf, all headquartered in cities in Rio Grande do Sul, complete the list of Brazilian suppliers. For years, Tabesa accounted for around half of Paraguay’s tobacco leaf imports, according to the country’s customs authority.
All of these exporters – with the exception of Prime Leaf and HT Agro – are affiliated with pro-tobacco lobbying groups such as the Brazilian Tobacco Industry Association (Abifumo) or the Tobacco Industry Union (SindiTabaco), which frequently accuse anti-smoking public health policies of fueling the illicit market. According to these organizations, increasing cigarette taxes, for example, makes legal products more expensive while making illegal ones comparatively cheaper and therefore more attractive. Variations of this argument are also used against other measures, such as restrictions on additives and flavors that make cigarettes more addictive or health warnings on cigarette packs, even though there is a lack of scientific evidence supporting these claims.
In practice, however, it is the tobacco industry itself – rather than public health policies – that fosters the illegal market by maintaining a profitable commercial relationship with Cartes’s company. Altogether, the nine tobacco companies identified in the report – eight of them linked to Abifumo or SindiTabaco – supplied Tabesa with more than US$ 240 million worth of tobacco leaf between 2014 and 2023, approximately R$ 1.2 billion at the current exchange rate. This type of sale is not taxed, since Brazil does not levy taxes on exports. The companies only stopped delivering tobacco directly to the Paraguayan factory starting in February 2023, weeks after Cartes was sanctioned by the United States government on corruption allegations.
In addition to Tabesa, the data reviewed by Joio also identified that, between 2020 and 2025, Marasca and Premium supplied 5,450 tons of tobacco to Uriom, a Paraguayan manufacturer that shares part of Brazil’s illicit cigarette market with Cartes and produces Gift cigarettes, the fourth most smoked brand in the country. Among illegal brands, it ranks second only to Eight, according to estimates from the National Forum Against Piracy and Illegality (FNCP), an entity linked to the tobacco industry that includes a BAT executive among its board members.
None of the Brazilian exporters supplying tobacco leaf to Tabesa and Uriom responded to Joio’s email inquiries. Abifumo and SindiTabaco also did not reply. The U.S. restrictions imposed on the former Paraguayan president were reversed in October 2025.
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Paraguay supplies the illicit cigarette market, studies say
Even so, despite the well-known connection between Paraguayan manufacturers and smuggling, the neighboring country is consistently among the top ten destinations for Brazilian tobacco, according to data from the Ministry of Development, Industry and Foreign Trade (MDIC). The amount of Brazilian tobacco imported by Tabesa in 2014 alone, for example, would have been enough for Paraguayan smokers to consume at least four packs a day that year, according to calculations by Joio. In practice, the country and its companies purchase large amounts of tobacco leaf, but officially consume and export relatively few cigarettes, suggesting that most of this production ends up in the illegal market.
A 2021 report by the Centro de Análisis y Difusión de la Economía Paraguaya (Cadep) estimated that, between 2008 and 2019, the cigarette supply in the country was seven times greater than domestic demand. A second study by the organization showed that while tobacco imports increased fivefold beginning in the early 2000s, official cigarette exports remained low and stable. “This large gap suggests significant illicit exports of cigarettes to Brazil and other neighboring countries,” Cadep emphasized. The Eight brand, for example, is also among the leading brands in the illicit markets of Chile and Argentina, according to the Paraguayan newspaper ABC Color.
Until the late 1990s, major manufacturers based in Brazil, such as BAT (formerly Souza Cruz) and Philip Morris, took advantage of the lack of regulations governing cigarette manufacturing in Paraguay and the country’s low taxes to flood the neighboring market, knowing their products would be smuggled back – at lower prices – into Brazil and Argentina. In response, the Federal Revenue Service created a tax on cigarette exports that made the scheme, known as “export smuggling,” unfeasible. MDIC data show that, as a result, Brazilian cigarette exports to Paraguay fell from 23,000 tons in 1998, one year before the tax was introduced, to zero in 2000. However, this vacuum allowed local manufacturers, such as Tabesa, to flourish by adopting the same strategy.
A study published in 2018 analyzing the rise of Cartes’s company shows that from that point on, the factory began aggressively competing for the Brazilian tobacco market against major cigarette companies such as BAT and Philip Morris, even if that meant relying on the illicit market. “The evidence suggests that Tabesa had become a major source of illicit cigarettes throughout Latin America and beyond by the late 2000s,” the study states. “While Brazil continues to account for the majority of Tabesa’s revenues, the findings suggest that the company aspires to compete with multinational corporations in markets around the world through both legal and illegal sales.”
Despite this, the Paraguayan company denies responsibility for supplying the region’s illicit trade. In an email to Joio, Tabesa CEO José Ortiz said the company’s cigarettes carry warnings in Spanish and Guarani, in addition to labels stating “for sale exclusively in Paraguay.” “Therefore, we believe that our products are in no way intended for the Brazilian market,” he stated. “In other words, consumers know perfectly well that these products either entered Brazil illegally or were counterfeited in Brazil.”
The executive also argued that FNCP data indicating that 17% of the Brazilian market consists of brands such as Eight and San Marino “does not correspond” to the production capacity of Tabesa’s factories, and that, if the figures are accurate, those cigarettes would not have been manufactured by the company but rather counterfeited by clandestine factories.
Although authorities have pointed to the growth of parallel manufacturing operations within Brazil in recent years, there is no evidence that this type of production has already surpassed Paraguayan smuggling. Brazil’s Federal Revenue Service told Joio that it participated in the shutdown of at least seven clandestine factories between 2017 and 2025. “We would only note that other law enforcement agencies may also carry out the closure of illegal factories,” the agency stated, adding that it does not maintain consolidated data on these operations. A tax auditor told the reporting team that, in recent years, the factories discovered have become increasingly larger and better equipped, indicating the expansion of this type of illegal activity. According to Metrópoles, 24 clandestine factories of this kind were shut down between 2021 and 2024.
However, despite Ortiz’s response, Cartes himself admitted in a 2012 interview with ABC Color that he knew Tabesa cigarettes were smuggled into Brazil and Argentina. “If the product goes to Brazil or Argentina, it’s the same case as Sadia: they sell the turkey, and if the product ended up in Paraguay, it wasn’t Sadia that sent it there, it was the people,” he told the newspaper. In Cartes’s view, “the product [from Tabesa] has prestige, which is why people take it.”
The data obtained by the report through ImportGenius also indicate that the company reduced its tobacco imports beginning during the Covid-19 pandemic and virtually eliminated them after the U.S. sanctions against Cartes in 2023. Subsequently, large-scale tobacco purchases began to be made by another Paraguayan cigarette manufacturer, Veneto, which started operating as an exporter of brands and heir to the former president’s company operations. “Production was outsourced due to Tabesa’s inability to manufacture, in order to keep the brands active,” Ortiz explained, assuring that the company complies with Paraguayan laws. Cartes’s sister, Sarah, is a former director of Veneto.
Initially, Veneto purchased 1,100 tons of tobacco leaf in 2023. By 2025, the figure had jumped to 13,300 tons, 12,200 of which came from Brazil, a level similar to Tabesa’s annual imports during the previous decade. This made the outsourced company the leading buyer of Brazilian tobacco in Paraguay, according to an analysis by Joio. Altogether, around 76% of Brazilian tobacco leaf exports to the neighboring country may have been imported by Veneto. According to ABC, the factory recently began selling Eight cigarette packs to Suriname, which, according to a report by Metrópoles, has become a new route for cigarette smuggling into Brazil.
The ImportGenius data, however, do not identify Veneto’s main suppliers over the past three years, only the Brazilian origin of most of the tobacco purchased. Veneto and Uriom did not respond to Joio’s attempts to contact them by email.
Anti-smuggling treaty offers solutions, but lobbying gets in the way
Today, Brazil imposes several regulations on tobacco product importers and cigarette manufacturers, which are required to obtain a special license from the Federal Revenue Service and declare their production volumes through a system that tracks national cigarette production. This type of regulation, however, does not apply to companies that process and sell tobacco leaf. In practice, there is nothing illegal about selling tobacco to anyone, including smugglers.
One possible solution to prevent Brazil from continuing to fuel this market by supplying the leaf used in illegal cigarettes is to adopt rules established under a World Health Organization (WHO) treaty, the Protocol to Eliminate Illicit Trade in Tobacco Products. The agreement was ratified by Brazil in 2018 – although the country has so far made little progress in adopting new regulations – and by Paraguay in 2022. At the time, Paraguay’s president, Mario Abdo, a political rival of Cartes, took the measure in part to provoke him. The former president and owner of Tabesa was a strong opponent of the ratification.
The protocol provides, for example, for the creation of licensing rules and monitoring systems not only for the manufacture of products such as cigarettes, but also for the wholesale sale of tobacco leaf. This would pave the way for greater oversight of tobacco companies such as Tabacos Marasca, Premium, and Alliance One, which are not subject to the same strict supervision as cigarette manufacturers. “The objective is to ensure traceability, prevent diversion into the illicit market, and strengthen oversight throughout the supply chain,” according to the National Cancer Institute (Inca).
However, like the Framework Convention on Tobacco Control (FCTC), a WHO-coordinated agreement recommending a range of anti-smoking measures, the protocol has also become a target of tobacco industry lobbying, which seeks to obstruct its implementation. “The industry will say that this is an area where it can collaborate, but it will usually focus on issues unrelated to its own role,” explains Rodrigo Feijó, program manager at the FCTC Secretariat, who works on the global implementation of the protocol. “So it will say the problem is counterfeiting or illegal production, without acknowledging that it also plays a role, for example, by failing to ensure that its clients will direct tobacco products toward legal purposes.”
The protocol also calls on governments to require companies in the tobacco supply chain to adopt “due diligence” measures. This includes, for example, requiring tobacco companies to monitor their clients to ensure they are not supplying the illicit market and to notify authorities if they suspect irregularities. “In corporate language, this is commonly known as know-your-client (KYC): if I sell my product to this client, can they prove there will be no diversion for illicit purposes? No one will be able to say, ‘I sold it and I don’t know what happened to my product,’” Feijó explains.
However, representatives of FNCP and the Brazilian Institute for Competitive Ethics (ETCO), groups linked to the tobacco industry that advocate fighting the illegal market through tax reductions, are critical of measures aimed at improving oversight of the destination of Brazilian tobacco production. “The [Paraguayan] manufacturers would seek other suppliers, and we would further penalize Brazilian producers,” attorney Edson Vismona, president of both organizations, told Joio in 2023. Neither Vismona nor the FNCP responded to emails sent for this report.
Today, Brazil is the world’s largest exporter of tobacco and the second-largest producer of tobacco leaf. In the latest 2024/25 crop season, the country harvested more than 719,000 tons of tobacco, according to data from the Brazilian Tobacco Growers Association (Afubra). In total, there are around 138,000 growers, most of them small farmers in the South region. For this reason, anti-smoking measures are often portrayed by the industry as retaliatory against family farming, which heavily supplies this market.
However, Brazilian tobacco companies themselves know that a significant share of national production has also been supplying the illegal trade.
In September 2025, during a meeting of the Tobacco Sector Chamber organized by the Ministry of Agriculture and Livestock (Mapa), SindiTabaco president Valmor Thesing indicated that the industry is “trying to understand” the future global demand scenario for tobacco, including estimating how much of the leaf ends up in illegal products. “Illicit market: how much are they absorbing? Today, we estimate, certainly, 10% of the 700,000 tons [produced by Brazil],” he said. “And it goes everywhere.” The video of the meeting was obtained by Joio from Mapa through Access to Information Law (LAI).
The report found that the federal government currently has no plans to adopt new regulations controlling the tobacco leaf sales chain, despite such measures being provided for under the WHO protocol to combat the illicit market.
