Analysis: How and why counterfeit products are so common in Brazil

RIO DE JANEIRO, BRAZIL – With a high economic power concentration, São Paulo is the largest distribution center for counterfeit goods in Brazil.

Every week, thousands of counterfeit products are seized in Brazil. Nevertheless, the illegal market has never stopped being supplied. The operation to bring counterfeit products to Brazil is complex. Efforts are made to change the route, the port, and the origin. And, for having the largest market in Latin America, Brazil is a target for criminals.

With the highest concentration of economic power in the country, São Paulo is the largest hub for the distribution of goods in the country. The streets Santa Efigênia and 25 de Março – both in downtown São Paulo – are two of the main destinations for counterfeit goods in the state.

“The state’s logistics and its economic capacity are attractive both to the legal as well as the illegal market,” says Alan Towersey, tax auditor at the Federal Treasury.

“Our main focus in the fight is to seize a larger number of items to prevent them from reaching the retail market,” says Wagner Carrasco, delegate of the 1st Precinct for Investigations of Intangible Property, of the State Department of Criminal Investigations (DEIC).

According to the National Forum Against Counterfeiting and Illegality (FNCP), the illegal material is produced mainly in China. From there, to circumvent inspection, before reaching Brazil, it is often sent to other destinations in South America, mainly to Paraguay, Bolivia, Guyana and French Guiana, as well as Suriname.

Counterfeit products coming from Guyana, French Guiana and Suriname enter Brazil through the Northern region’s rivers and typically unload at the port of Belém, in the state of Pará. The goods sent to Bolivia reach Brazil by road, mainly from Mato Grosso do Sul. Counterfeit goods that leave Paraguay enter Brazil through Foz do Iguaçu, a route that is also used for smuggling.

“The activity of counterfeiting, export and worldwide supply of counterfeit products is comparable to drug trafficking. It is an extremely lucrative activity, in which international gangs make a lot of money,” says Richard Neubarth, a customs officer  with the Federal Treasury at the Port of Santos.

Seizures

Each container holds, on average, 20 tons of products. In one of them, recently seized at the port of Santos, the front section contained cell phone covers that were declared, so, technically, the material was legal. However, this drew attention and when looking a little further, inspectors realized that most of the cargo contained illegal products.

This is a strategy often used by counterfeiters. Inspectors found clothes, sunglasses, toys, handbags… All counterfeit. The Treasury estimates that had these products reached their destination, the criminals could make millions in profit.

“Here at the Port of Santos, we have 15 scanners, we obtain the images in real time. From the port’s operations center, our analysts are able to identify counterfeit goods through imaging,” says Neubarth.

While some products are easily recognizable fakes, others replicate the real items down to the most minute details. “Here we see very well counterfeited goods, a layman would hardly be able to distinguish between the legitimate and the counterfeit,” says the delegate.

To estimate the size of the problem,the report visited the plant of one of the world’s main ball bearing industries. According to its representatives, in 2020 the company received 600 calls to check the authenticity of parts offered in the market. The conclusion was that in 70% of cases, products were counterfeit.

“There is no adequate competition between counterfeit and genuine bearings, a symmetrical competition. The entire bearing industry is damaged to the point of lacking adequate job generation, revenue growth, and tax collection that will support social and economic development,” says Alex Pereira, SKF sales manager.

Counterfeits are often so accurate that the analyses to identify the forged products need to be conducted at the company’s headquarters in Sweden. According to the sales manager, there are several cases of industries that were forced to suspend production because, unknowingly, they were using counterfeit parts.

“We had a client here, a Brazilian industry that bought a forged bearing, bought it unknowingly, installed it in their machine, and the machine failed. This plant was halted for a few days. The time this plant was down cost around R$50,000 (US$9,700). So just think of the damage this may have caused,” says Ademar Oliveira, skf sales manager.

Different from other products, counterfeit bearings can be even more expensive than original ones. “There are bearings that you won’t find on the market, but the counterfeit has a longer life. You can’t find the genuine and the counterfeit has a longer life, so the client ends up buying a counterfeit bearing above market price,” says Pereira.

In addition to the counterfeit material coming from other countries, others are also manufactured within Brazil. According to the civil police, in this case, the focus is on the textile and footwear industry. Most of the illegal manufacturing occurs in the cities of Nova Serrana in Minas Gerais, Apucarana in Paraná, and Franca in São Paulo.

Despite the consequences of counterfeiting being so damaging to the economy, according to inspection agencies, the legislation hinders the fight against counterfeiting in some aspects.

Today, for each seizure, the owner of the true brand must report to Customs by submitting a non-authenticity certificate, or else seek judicial seizure of the goods. Should this not be done, the merchandise continues its journey, is cleared and placed on the market.

Digital piracy

If fighting physical counterfeiting is hard enough, digital piracy is even more so. In addition to the sale of fake products over the Internet, the hijacking of cable TV signals and streaming platforms today represents a loss of approximately R$15 billion per year.

“Almost 150,000 jobs are lost to formal companies that work to develop the country, precisely because there is a preference for illegal consumption from operations that do not pay taxes and do not respect third-party rights,” says Jonas Antunes Couto, director of the center for fighting piracy.

Source: CNN Brasil