TOBACCO INTERNATIONAL

TI March 2016

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MARCH 2016 TOBACCO INTERNATIONAL 29 Brazil's Outlook: Will Political Turmoil Be a Matter of Concern? What are the implications of Brazil's political turmoil for its tobacco industry? –By Guido Jungbluth A s a rule, the tobacco sector in Brazil remains unconcerned about any political turmoil, as such events are no novelty in this coun- try. On the other hand, besides the an- ti-smoking campaigns, which have mo- mentarily come to a standstill, the gov- ernment seems to be more interested in collecting hefty taxes from the sector, showing no other interest in this ac- tivity. For their part, the tobacco com- panies spare no effort in taking advan- tage of the situation. They are revising their strategies and adhering to changes and innovations intended to adjust the processes to the new reality in order to remain competitive. Despite all the problems, the dealers are advising the farmers not to reduce their planted area for the next season, whilst holding on to their crop diversification initiatives. The only negative implication has to do with cigarette sales. It is no secret that there is rampant cross border cigarette smuggling in Brazil. And, as a result of the political turmoil, the government seems to have abandoned any initiatives aimed at curbing this illegal trade, now getting out of control. Early this year, Souza Cruz shut down its cigarette man- ufacturing plant in Cachoerinha, near the capital city Porto Alegre. According to company sources, cigarette smuggling was a factor in this decision. What influences from the Brazilian tobacco industry might affect or re- shape the country's political future? There is very little the Brazilian to- bacco industry can do to re-shape the country's political future, as the sec- tor is rarely the focus of the political establishment, unless tax hikes and antismoking campaigns are at stake. However, the tobacco sector is setting an example to other companies about how to behave when problems arise. The sector is simply disregarding the political turmoil, and continuing to focus on innovation and keeping the farmers motivated through soil man- agement practices, productivity gains, planning and sustainable development. The tobacco industry is setting an ex- ample of how to continue on the right track even in times of unrest, contrary to other sectors that simply retreat from the market and lay off employees. The Brazilian tobacco industry can do little to re-shape the country's politi- cal future, other than continuing to focus on innovation and keeping the farmers motivated through soil management practices, productivity gains, planning and sustainable development. Despite all the problems in Brazil, the dealers are advising the farmers not to reduce their planted area for the next season, whilst holding on to their crop diversification initiatives.

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