CIUDAD DEL ESTE, Paraguay — Business is booming in this city along the Paraná River, where Paraguay, Brazil and Argentina meet. The city center is a warren of street vendors and malls selling goods to flocks of tourists — clothing, footwear, electronics, video games, cosmetics and pharmaceuticals.
There’s only one problem. The goods are counterfeits of American brands or authentic goods smuggled into Paraguay. Together with money laundering, the illegal trade amounts to an estimated $17 billion a year in Paraguay, an astounding sum in a country where the annual legitimate economy is valued at $29 billion.
Ciudad del Este has been on the U.S. Trade Representative’s “Notorious Markets List” for 16 years. The list identifies markets where illegal trade causes major financial losses for U.S. businesses and workers.
Emblematic of the lax enforcement, this reporter witnessed Paraguayan police officers standing next to stalls of pirated American movies that sold for just $1 each.
One Paraguayan street vendor, Marina Lopez, said she buys counterfeit American clothes from local sellers in factories in Paraguay, Bolivia and Argentina. She sells a Gap pullover with a retail price of $49.95 for just $14. A Tommy Hilfiger T-shirt that retails for $44 goes for $8 at her stall.
Recently, Paraguay’s government has taken new steps to thwart the illegal trade. In March, the National Office of Intellectual Property (DINAP) seized $23.6 million worth of fake Apple and Samsung computer screens, iPhones and covers. In December, the office confiscated $150 million in bogus Apple, Calvin Klein and Tommy Hilfiger products, along with fake Korean brands.
Paraguay is often a transit port for smuggling counterfeit goods to Brazil and Argentina. Traffickers here sell contraband to sacoleiros (smugglers), who sneak into Brazil through the Friendship Bridge.
Brazil, Argentina and Paraguay agreed in March to set up a control center to crack down on the counterfeit trade. So far, there are few signs of success.
On the hectic Adrian Jara Avenue in Ciudad del Este, the traffickers can be seen transporting large boxes wrapped in black plastic amid heavy traffic of cars, motorcycles and trucks.
“American businesses are losing because falsified American products are re-exported to Brazil,” said Patricia Stanley Zarza, director of DINAP.
“There is a commercial war between China and the U.S. in Ciudad del Este because counterfeited American products come from China, especially from … Hong Kong,” she said.
Imported counterfeited goods are cheaper in Paraguay than in Brazil, which limits duty-free purchases to $300 a month, a stringent cap that encourages smuggling. Among the popular items: counterfeit Viagra, which is easier for sacoleiros to transport to Brazil and Argentina than bulkier clothes or electronics.
This month, Brazilian authorities seized 200 tablets of sexual stimulants hidden in rubber balls in the northern city of Manaus.
“Pharmacies at the periphery of the city sell fake medicine (from) laboratories that do not have a registry,” admitted Marcelo Ferreira, a pharmacy owner here.
Widespread corruption is the biggest barrier to slowing the trade of counterfeit goods in Paraguay. Transparency International, which tracks corruption, ranks it 150 in honesty out 175 countries.
An American investigator, who has been combating counterfeit goods in Paraguay on behalf of international clients for 15 years, has first-hand experience with corruption there.
The investigator said that in the past, she would present a complaint to the intellectual property rights prosecutor in Ciudad del Este and then raid the shop suspected of selling the bogus items.
But she said she stopped raiding suspicious shops there because judges, who must approve raids, often would tip off store owners in advance in exchange for bribes. The investigator asked that her name not be used because of threats from the Paraguayan government.
In addition, she said, some local law firms provide bogus permits that let shipments of counterfeit items enter Paraguay in exchange for money.
Paraguayan authorities say they also are hampered by new ways traffickers smuggle goods. “The problem is that there is mix (of falsified goods) because drugs are transported in cigarettes and computer cases,” said Mario Ruben Villalba Zacarias, police chief of Asunción, Paraguay’s capital. “Smugglers change strategies so we, too, have to change and update our type of investigation,” he said, calling it “a constant fight.”
Although piracy represents billions of dollars of losses in tax revenue, it also profits Paraguay, Brazil and Argentina.
“It creates temporary jobs, (provides) families a livelihood and puts small industries and local shops into operations,” said Emiliano Barbuto, criminal intelligence analyst at the airport security police in Buenos Aires.
This feature was published in USA Today on May 18, 2015. Click here.
