Tobacco-funded group TRACIT tries to influence tobacco control policy in Costa Rica

18 June 2020

Gabriela Zamora Sauma, Adiariocr:

The Transnational Alliance to Combat Illicit Trade (TRACIT), an organization of which Philip Morris International (PMI) is a partner, has been attempting to interfere in the design of public policies in Costa Rica and other countries by requesting the strengthening of the Joint Commission Against Illicit Trade or by opposing legislation that seeks to regulate cigarette smuggling.

In August 2018, TRACIT representatives met with government officials who are members of the Joint Commission Against Illicit Trade, which also includes private sector delegates. At that meeting, organized by the U.S. Chamber of Commerce in Costa Rica (AmCham), TRACIT members who came to the country presented the Global Illicit Trade Environment Index, which they commissioned from The Economist Intelligence Unit.

The Global Illicit Trade Environment Index is sponsored by Amcham Costa Rica, the Industrial Association of the Dominican Republic, Authentix, Brand Protection Group of Brazil, British American Tobacco (BAT), BCIU, Coca-Cola, Crime Stoppers International, Diageo, Eurocham Myanmar, Ideas Matter, JapanTobacco International, Marazzi and Associates, NIS, NPIC, PernodRicard, Philip Morris International (PMI), PEFC, Procter & Gamble, Richemont, Unilever and Universal Music.

On that occasion, during an interview conducted by Diario ExtraJeffrey Hardy, Executive Director of TRACIT, was emphatic that the government should strengthen the work of the Inter-institutional Joint Commission [sic] that presides over the Ministry of Finance, which defines public policies that can be influenced by representatives of the private sector, including the tobacco industry.

Indeed, Amcham’s representative to the Joint Commission is Gerardo Lizano, former Manager of Corporate and Regulatory Affairs at British American Tobacco Central America (BATCA).

In addition, in the minutes of the Joint Commission that were reviewed for this report, it is noted that the only company invited to the sessions is Philip Morris International (Mendiola & Cía. in Costa Rica). Specifically, on May 2, 2019, Susana Salas and Arturo Fernández, managers of External Affairs and Illicit Trade for Costa Rica and Central America, respectively, attended.

But that was not the only time he wanted to make his influence evident. On May 7, 2019, TRACIT addressed government and industry officials during a conference on illicit trade organized by the Latin American Anti-Trafficking Alliance (ALAC), another organization with a strong tobacco presence, to once again present the Global Illicit Trade Environment Index.

Similar activities have been carried out in other Latin American countries, such as the Dominican Republic and Argentina (2019), Colombia and Ecuador (2018) and Panama (2017).

What TRACIT is and what it seeks

TRACIT was officially launched on September 6, 2017, in New York, and was presented as “a private sector initiative to enhance business collaboration with governments and intergovernmental organizations to mitigate the social and economic damage of illicit trade”.

Dr. Eduardo Bianco

In the same year of its creation it began to receive funds from PMI, according to Uruguayan Dr. Eduardo Bianco, Technical Director of the Centre for International Cooperation on Tobacco Control (CCICT) in Uruguay, based on research carried out by the British University of Bath, as can be corroborated by its Tobacco Tactics Project.

“In March 2019, the PMI IMPACT initiative awarded TRACIT US$21 million of the US$100 million it donated to 31 organizations that year. By 2017, it had already donated US$20 million to 29 projects, including TRACIT,” explained Bianco, a prestigious professional awarded awarded by the World Health Organization (WHO) for its international leadership in tobacco control.

The University of Bath, in its Tobacco Tactics Report, has shown that Philip Morris InternationalBritish American Tobacco and Japan Tobacco International have all been partners in TRACIT projects, providing funding directly or through their partnership with Crime Stoppers International.

Bianco has no doubt: “The tobacco industry uses TRACIT to reach out to governments and international organizations, in a “more credible” way than if it did so directly, given its tarnished international image.  This allows it, indirectly, to be part of government bodies in charge of combating illicit trade or advising them, something it cannot do openly since it is forbidden by an express provision of the Framework Convention on Tobacco Control (FCTC) and its Protocol against Illicit Trade.

And its main objective, he says, is to discredit the most effective of all anti-smoking measures: applying high taxes, around 80% the price, to cigarette packs.

Allen Gallagher

“In addition to its attempts to influence the Costa Rican Government, TRACIT has fueled industry-friendly policy changes throughout Latin America, in Asia, the Middle East, Europe, and Africa. A global organization like TRACIT, funded by the tobacco industry requires global awareness and action to protect public health, “says Allen Gallagher of the University of Bath, part of the global STOP Initiative.

Violation of the FCTC

As is known, Costa Rica has fully adhered to the tobacco control policy promoted by the WHO. In 2008 it signed the FCTC, and in 2012 it approved the General Law on Tobacco Control and its Harmful Effects on Health (9028) and its Regulations. In 2013, the labelling of tobacco products was regulated and in 2016 the Protocol for the Elimination of Illicit Trade in Tobacco Products was approved. It is a world leader in tobacco control.

Dr. Nydia Amador

“Costa Rica has made progress in tobacco control by reducing the prevalence of consumption to 8.9%. But it is not 100% protecting public health policies regarding tobacco control from the commercial interests of the tobacco industry,” says Dr. Nydia Amador of Costa Rica’s National Anti-Tobacco Network (RENATA).

“It is contradictory that tobacco companies that have been judicially convicted and fined in the European Union, the United States and Canada for being involved in the illicit trafficking of tobacco products are part of TRACIT and Amcham and are given space – through these organizations – in a Joint Commission that seeks to eliminate smuggling. It’s like watching out for cheese,” he adds.

In its Article 5.3, the FCTC warns that “in establishing and implementing their public health policies regarding tobacco control, Parties shall act in a manner that protects such policies from commercial and other vested interests of the tobacco industry, in accordance with national law.

For Amador, governments should not allow the participation of entities that defend the interests of the tobacco industry in their commissions.

Dr. Reina Roa

Dr. Reina Roa, from the Panamanian Ministry of Health, recalls that “the Parties to the Protocol should not receive TRACIT or establish alliances with this entity, or with any other entity that has direct or indirect links with the tobacco industry.

Roa, recently recognized globally by the WHO for her activism and leadership, insists that the protection of tobacco control policies from tobacco industry interference is a legal duty of all governments that have signed the FCTC and the Protocol, making them an integral part of national legislation.

Michél Legendre, director of tobacco control at Corporate Accountability, warns that “tobacco companies are using a backdoor tactic to finance an organization like TRACIT in order to gain access to governments and influence policy.

Dr. Beatriz Champagne

For Dr. Beatriz Champagne of the InterAmerican Heart Foundation (IAHF), “AMCHAM, ALAC and TRACIT are all organizations that are trying to convince governments to use mechanisms that actually favor the tobacco industry. There is evidence from Europe and other parts of the world that the tobacco industry has been part of the illicit trade because it is convenient for it to sell cigarettes and other tobacco products at low cost.

Why TRACIT is promoting the strengthening of the Joint Commission

As TRACIT itself states, its agenda is driven by profit: “Governments create the frameworks and conditions, but it is business that drives the economy, so we must seek to ensure that policy makers understand business priorities and use business knowledge,” it says.

In the case of Costa Rica and probably other countries, the way to achieve this seems to be through intensifying and strengthening the influence of the private sector in the Joint Commission, something that also exists in other Latin American countries.

This was created by decree in April 2014 by former President Laura Chinchilla to articulate the fight against smuggling and was integrated by five government entities: the ministries of Economy, Industry and Commerce; Government and Police; Public Security; Finance and Health.

But in August 2016, the government of Luis Guillermo Solís reformed the decree and incorporated Amcham and the Costa Rican Union of Chambers and Associations of Private Enterprise (UCCAEP).

Teresita Arrieta

Teresita Arrieta, Vice President of RENATA, denounces that at that time there was a transgression of Article 5.3 of the FCTC: “By amending the decree and incorporating representatives from AmCham – whose members include British American Tobacco and PMI – and UCCAEP, whose members include AmCham itself, the Chamber of Industries and the Chamber of Commerce, which are affiliated to the tobacco industry, the Convention is being violated,” she says.

In September 2017, over 20 international organizations requested former president Solis to exclude representatives of Amcham and UCCAEP from the Commission, as they could not be both judge and party. But representatives of the Ministry of Finance told RENATA that the Technical Committee of the Joint Commission defined the legitimacy of the chambers within the Commission “as they do not focus on tobacco but on the industry in general,” according to the letter received by RENATA.

For Dr. Amador, not only is there flagrancy with respect to the FCTC and the Protocol, but “this is equivalent to having the merchants warned of how the government will control them. With industry representatives on this Commission, the government is losing the ability to control the illicit trade in certain products.

In 2015 the New York Times published an investigation proving how the Amcham worked globally to combat anti-smoking measures in several countries”.

Interference in Ecuador

This year, a study published in the Tobacco Atlas showed how Philip Morris International profited from cigarettes smuggled into Ecuador and now intends to obtain tax compensation for the alleged damage through the intervention of its affiliates in Ecuador – ITABSA, TANASA and PROESA – in the discussion of the ‘Organic Law for the Prevention and Combat of Smuggling and Customs Fraud of Goods’ project being discussed in the National Assembly of Ecuador.

Dr. José Ruales

Regarding this fact, Dr. José Ruales, President of the Inter-institutional Committee for the Fight against Tobacco (CILA) of Ecuador, assures that there are multiple evidences of interference and transgression to the FCTC: “Mainly in relation to the violations to Article 5.3. And as far as TRACIT is concerned, I am concerned about the references to the Global Illicit Trade Environment Index 2018, prepared by The Economist for TRACIT, and which are evident in the explanatory memorandum of the two bills that inspire the Bill under discussion”.

If you are looking to improve control of illicit tobacco trade in Ecuador, why is the index commissioned by TRACIT presented as a statement of reasons against this law?

Perhaps the answer lies in the interests that TRACIT represents.

Who does TRACIT represent?

We contacted Jeffrey Hardy, TRACIT’s Executive Director, to inquire about this. After assuring him in two emails that he would answer a few questions, he finally did not.  However, the information on the website is clear and its eleven partners are: alcoholic beverage companies ABinBev, Heineken, Diageo and Pernod Ricard; pharmacist Novartis, tobacco company Philip Morris International, P&G, Richemont, PVH-Calvin Klein-Tommy Hilfiger, Syngenta and Universal Music Group.

Membership costs a minimum of $25,000 per year, which does not mean much for companies with annual revenues exceeding $29.6 billion, as was the case with PMI in 2018.

TRACIT’s mission is to raise funds and expertise to advance its members’ initiatives and to interact with governmental and intergovernmental organizations.

Michél Legendre

Michél Legendre points out that this is an old interference tactic of the tobacco companies: grouping tobacco with other industries and presenting a front entity. “TRACIT is carrying out tobacco-related actions around the world and is using its reports and events to address decision-makers.

Eduardo Bianco says that “because TRACIT has close connections with the tobacco industry, it provides a biased view of the illicit tobacco trade, ignoring or hiding the clear evidence of the tobacco industry’s involvement with the illicit tobacco trade. This is strategically important to tobacco companies, not so much because they may be losing out on profits, but because it is their main ‘workhorse’ in opposing the main measure to reduce tobacco consumption: price increases through tax increases,” he adds.

Tobacco interference to lower taxes

“The industry’s main reason for keeping the issue of illicit tobacco trade high on the media and government agenda is to oppose taxes. Without a doubt, the strict application of the Illicit Trade Protocol will affect part of their business. The grouping with other industries in TRACIT positions them better in the attempt to gain credibility,” Dr. Bianco insisted.

There are many examples of this. In February 2017, PMI manager Susana Salas told La Nación Newspaper that more taxes would cause an imbalance in the market and more consumption of illicit products.

Interference to stop fiscal traceability of tobacco products

Another major objective of the tobacco industry is to prevent countries from installing fiscal traceability systems to control the production and imports of tobacco products, which are highly efficient in controlling the correct payment of taxes. Or, that these systems are tailored to their interests, that is, not independent.

For Legendre, the STOP report Protecting the Tracking and Tracing System of the Tobacco Industry, “shows that the industry is still involved in smuggling. Therefore, it has a clear interest in controlling the tracking and tracing systems, because this allows them to continue this involvement with impunity, evading taxes and avoiding possible litigation”.

“The tobacco companies managed to control data on smuggling and used it to exaggerate the counterfeiting of small competitors while concealing their own involvement, convincing governments that they are the victims and not the perpetrators of smuggling. They developed their own verification system [Codentify or Inexto] which they promote by using third parties as independents. If governments allow this system, they will lose their ability to control smuggling and the payment of tobacco taxes,” Legendre said.

On this aspect, Teresita Arrieta points out that in Costa Rica the Association of Producers and Importers of Alcoholic Beverages (APIBACO) promoted a seal of self-control that totally failed and did not prevent a crisis of intoxication with adulterations that caused dozens of deaths in 2019. “We fear that they want to impose something similar for tobacco from the Joint Commission to get rid of a real fiscal traceability system, as required by the Protocol against Illicit Trade. It was Gerardo Lizano, the former manager of BATCA, who presented the failed alcohol stamp at a press conference from the Finance Ministry,” she warned.

For the purposes of this report, more than 10 politicians and parliamentarians were consulted, but all admitted to not knowing about TRACIT and also the Joint Commission.

But given the amount of money TRACIT receives from the tobacco and liquor companies, and the insistence that it promotes strengthening the joint commissions to question the adoption of the measures contained in the Protocol and the FCTC, governments must be vigilant in investigating who is conducting the illicit trade studies and what their real interests are.

With the Protocol having entered into force as international law in 2018, the 60 country Parties must be vigilant in complying with its provisions. In Latin America, six countries have ratified it. They are Brazil, Costa Rica, Ecuador, Nicaragua, Panama and Uruguay.

The Scourge of Tobacco

The World Health Organization (WHO) has warned that tobacco use causes the death of more than 5 million people a year. If this continues, by 2030 it will cause the death of 8 million people, at which point 80% of deaths will occur in low- and middle-income countries with high health system costs.

This is why the world has been trying to reduce tobacco consumption and since 2003 the FCTC was adopted, and the effort has been reinforced with the adoption of the

According to the report on the Global Tobacco Epidemic 2019, today there are 5 billion people protected by at least one tobacco control measure. However, there are still 2.6 billion people who are unprotected and at risk from the harms of tobacco use. In fact, only Brazil and Turkey implement all MPOWER measures in a comprehensive manner.

If governments do not shield themselves from the FCTC and the Illicit Trade Protocol by following them to the letter and without any interference from the tobacco industry, it will be very difficult to stop the scourge of tobacco.