Much ado about smuggling

Martha Ferro visits San Andresito to find out about the impact of new laws

The Colombian government is determined to battle contraband. And, amongst others, Colombia’s Federation Sanandresitos (FESACOL) is determined to fight the changes.

This is not about the sale of cheap – and sometimes dangerous – alcohol at San Andresito, it is a much more complex debate about trade, illegal trade and the rights of small businesses.

From the government’s point of view, the anti-contraband law will protect jobs and fight money laundering. On the other side, FESACOL says that 4 million small businesses will be affected, and that the new laws are not the right way to combat smuggling.

One trader told Blu Radio, “We have the right to decent work, there are many families represented here, this is about the overall trade in Colombia, and wanting to monopolise everything.”

President Santos said, “We are fighting against a phenomenon that destroys nearly 350 thousand jobs and which costs the economy USD$6 billion per year, the equivalent of 2 points of GDP.”

Moreover, according to Finance Minister Mauricio Cárdenas, “Smuggling is the other face of the drug dealing coin. Drugs go out of the country and come back as cheap goods exempt from taxes. Colombia fails to receive almost COP$2.9 billion in duties each year due to the contraband of goods.”

The new law

On June 20 Colombia’s congress approved a new anti-smuggling law, which was subsequently ratified by President Santos on July 6. “This law has long been debated and discussed. Contrary to popular belief, it is not to the detriment of small businesses. It aims to target large-scale smuggling and money laundering organisations”, the President stated.

One of the law’s main objectives is to set tighter punishments: if merchandise is worth more than 50 minimum salaries (COP$32,217,500), guilty parties can face prison sentences from four to eight years. If merchandise tops 200 minimum salaries (COP$128,870,000) the sentences will be from eight to 12 years. Additionally, fines will be up to 300 percent of the value of the illegal merchandise.

The new law will pay special attention to fuel smuggling, with sentences of up to 16 years for those who are caught with over 1,000 gallons.

There is also an emphasis on products such as rice, potatoes, onions, eggs, medicines and vehicles, which are considered to be ‘sensitive’ – contraband of these articles could have a marked effect on the economy.

In addition, where public workers participating in smuggling activities were previously only penalised if the merchandise exceeded 50 minimum salaries, they can now face imprisonment for smaller offences.

San Andresitos

One of the sectors set to be most affected by the law are Colombia’s “San Andresitos”, with around a hundred locations nationwide. Here, many small businesses jostle together for space, selling all kinds of goods – most of them from abroad – such as clothes, electronics, perfumes, alcohol and jewellery, amongst many others.

On July 2, FESACOL organised a march to protest against the anti-contraband law in Bogota, Medellin, Barranquilla, Pereira and Bucaramanga. Nearly 3 million people attended the protest, according to the statement provided to RedNoticias by Albeiro Camacho, president of the Federation.

“With this law, the government is affecting more than 4 million small businesspeople. In the San Andresitos in Bogota alone, there are almost 13,000 jobs which could disappear”, Camacho announced.

In an interview given by Ricardo Rodriguez, manager of the Centro Comercial Puerto Principe, to The Bogota Post, Rodriguez explained that it is not that he and the businesses in San Andresito are completely against the law, but that they want the government to listen to them and modify certain aspects of it. For example, the administrative procedures need to be changed because right now the law encourages monopolies, or the dominance of a very small number of sellers of imported goods.

He illustrates his point by explaining more about the importation of perfumes. Only one company is permitted by the government to import this merchandise. Some time ago, this company sold their merchandise to the shops in San Andresito.

However, they refused to continue the sales because the San Andresito vendors were undercutting the stores of La Riviera (owned by the same company).

According to Mr. Rodriguez, goods in San Andresito can be sold for a cheaper price than in the shops and malls due to their lower operating costs, and as most businesses are family-run enterprises, sharing profits but without giving “real salaries”.

Another problematic area for Rodriguez are the government’s import tax policies. These are defined according to the type of shop, which he feels is unfair to the San Andresitos. Big department stores such as Falabella are considered “trusted importers”, so imported taxes are calculated by kilo according to the weight of the merchandise. For other importers – such as the businesses in his warehouse, each item is taxed separately.

The pressure from FESACOL did cause the government to make some amendments to the laws that were passed on July 6. Time will tell whether the new laws will have an impact on money laundering or tax evasion, and whether the warehouses can survive the new legislation.

By Martha Ferro