Beyond Citizen Cisco: Fiscal Fouls in Far-Flung Free Trade Zones!

https://i2.wp.com/www.fpf.br/saglisuframa/image/suframa.jpg
SUFRAMA: Bringing down the hammer?

“The criminal group comprises business owners, accountants and employees of the Superintendent of the Free Trade Zone of Manaus (SUFRAMA), the Rondônia state finance secretary and the federal tax authority.”

Chefe da polícia
pelo telefone
mandou avisar
Que na Carioca
havia uma roleta
para se jogar …

The Agência de Notícias de Polícia Federal (Brazil) reports: Before there was the Cisco “scandal” here in Brazil — pumped up by the press because of the high profile of the multinational brand (and the astonishing degree of eye-gouging and ear-biting that characterizes Big Tech competition down here) — there was Operation Free Zone.

See also

What all these cases have in common: Corruption of public officials in schemes designed to improve competitive position and market share by avoiding taxes and duties.

And really, despite all the noise made about Dr. van Roosmalen as a martry to modern science at the hands of the bumbling Brazilians, the case of the Monkeyman had much more to do with Sino-Paraguayan import-export practices than with taking a few monkeys home without a license.

See

Occupying the role of Cisco and its resellers as the outed johns in that case: Nature television production companies. Who does not love a fascinating episode of nature TV? Our nephew, Fabio, 5, recenty announced that cartoons are for babies and that he is only interested in watching Animal Planet from now on. (He went back on this policy within about 3 minutes.)

I myself grew up on Marlon Perkins of Mutual of Omaha and his studly sidekick, Jim.

Except that none of those companies suffered massive media exposure of their pecadillos in the case.

Like the coy Alberto Dines in the Cisco case — see Cisco Case: “Media Gives Evil Multinational Kid Gloves Treatment!” — I just simply cannot imagine why. (I am feigning perplexity here. I have some notion of why that might be.)

In other words, there are cases of a very similar nature to be read about both before and after the Cisco case — which makes you wonder whether you can profitably view this as “the Cisco case” at all. Cisco, whatever its exposure to the trend turns out to be, is being made something of a poster child for the “folklore of the evil corporation” here, I think.

Therefore, a smart risk manager might have seen this “free trade zone” case from the hinterlands, dated October 10, as a preshock — and might even be wondering whether the Cisco case is really the main tremor after all. Rig up your seismometers to your newsflow algorithm and stay tuned.

Because these are not tactical maneuvers, I submit to you: this is national strategy. And the brushfires apparently start with court-ordered wiretaps on federal employees suspected of being on the take.

Brazilian and multinational businesses will figure in the perp walk to the extent that they wander down there to the Zone, to negotiate programas with the hookers.

If I may use a crude metaphor, inspired by the journalistic wit and wisdom of Larry Rohter — one of whose constant themes is that “Brazilians are paranoid about foreign designs on the Amazon region.”

But the guy the Brazilian feds really seem to be after is Willie the Pimp and his partner in crime, Officer Friendly.

The official press release:

PORTO VELHO/RO – A Polícia Federal desencadeia hoje, 10, a operação Área Livre, que investiga organização criminosa especializada sonegação de tributos e fraude em incentivos fiscais.

On October 10, the federal police [unleashed] Operation Free Zone, which is investigating organized crime specializing in tax evasion and fraudulent abuse of financial incentives.

A investigação, que começou em 2002, revelou que o grupo utilizava empresas fantasmas para fraudar os incentivos tributários concedidos às Áreas de Livre Comércio (ALC’s) de Brasiléia e Epitaciolândia, no Acre, e Guajará-Mirim, em Rondônia. Ao fatura mercadorias para essas áreas de exceção fiscal, o grupo lograva adquirir produtos por um custo até 25% menor que o pago por seus concorrentes. Posteriormente, os produtos eram comercializados em outras cidades, principalmente em São Paulo.

The investigation, which began in 2002, revealed that a group was using shell corporations to defraud the program of tax incentives granted to Free Trade Zones (ALCs) in Brasiléia and Epitaciolândia, in the Amazonian state of Acre, and Guajará-Mirim, in [the border state of] Rondônia. In bringing merchandise into these duty-free zones, the group managed to acquired products at a cost up to 25% lower than that paid by their competition. Later, the products were marketed in other cities, principally São Paulo.

Em outra forma de atuar, a organização criminosa também auxiliava outras empresas do Acre e Rondônia a sonegar tributos do mesmo programa de incentivo. Estima-se que a fraude total nas duas ALC’s, envolvendo também a atuação de outras quadrilhas, possa superar R$ 240 milhões no período de 2002 a 2006. Apenas com as operações feitas através das mencionadas empresas fantasmas, os prejuízos aos cofres da União e dos estados é de mais de R$ 7 milhões.

In another of its operations, the criminal organization aided other firms in Acre and Rondônia to evade taxes in the same incentive program. It is estimated that the total amount of fraud from the two ALCs, including the activity of other criminal schemes, might exceed R$240 million for the period 2002-2006. Transactions made through the shell corporations alone may have cost the federal coffers more than R$7 million.

Cerca de 180 policiais cumprirão 40 mandados de busca e apreensão nos estados de Rondônia, Acre, São Paulo e Tocantins. Participam das buscas alguns auditores da Receita Federal. O grupo criminoso é composto por empresários, contadores e servidores da Superintendência da Zona Franca de Manaus – SUFRAMA, da Secretaria de Finanças de Rondônia e da Receita Federal.

Some 180 federal agents will serve 40 search warrants in Rondônia, Acre, São Paulo and Tocantins, with the assistance of some federal tax authority auditors. The criminal group comprises business owners, accountants and employees of the Superintendent of the Free Trade Zone of Manaus (SUFRAMA), the Rondônia state finance secretary and the federal tax authority.

On the ZFM administered by SUFRAMA:

A Zona Franca de Manaus (ZFM) é um modelo de desenvolvimento econômico implantado pelo governo brasileiro objetivando viabilizar uma base econômica na Amazônia Ocidental, promover a melhor integração produtiva e social dessa região ao país, garantindo a soberania nacional sobre suas fronteiras. A mais bem-sucedida estratégia de desenvolvimento regional, o modelo leva à região de sua abrangência (estados da Amazônia Ocidental: Acre, Amazonas, Rondônia e Roraima e as cidades de Macapá e Santana, no Amapá) desenvolvimento econômico aliado à proteção ambiental, proporcionando melhor qualidade de vida às suas populações.

[tktktktk]

The angle on this story that really interests me is the degree to which this same sort of scheme is used to avoid federal controls on the use of electronic components, destined for industrial and commercial use, for the assembly of illegal gambling machines — caça-níqueis.

A division of the alt.leisure sector known as the jogo do bicho. See

Yes, this story and the war on the jogo do bicho do join up at a certain point — and not by accident, or merely incidentially, either.

I am looking at a copy of Época Negócios (Editora Globo) magazine as I write this and am reading the following cover-blurb (hasty translation):

A Globalized World? Not Very. In a provocative book, a Harvard professor warns: Strategies that bet blindly on an end to national borders could lead companies to disaster.

I believe I read that same book myself, and others like it … several years ago.

Recent events suggest it was less of a provocative new hypothesis and more of a highly successful risk-management prognosis.

This is sort of the Globo way, I find: Branding the same old same old — which Globo has done more than its part to keep swept under the rug — as the latest disruptive-emergent crisis!

Once word gets out on the dirty secret that everybody on the street has known about since time immemorial, that is.

If a bunch of cops get busted running child prostitution rackets in Rio, Globo breathlessly discovers this “emergent” phenomenom, and brands it as a crisis.

Conveniently forgetting that Gilberto Dimenstein reported on the phenomenon fifteen years ago, but that nothing much has changed since then.

Please. I was not born yesterday. And I think it is incredibly counterproductive to try to create a generation of people who were born yesterday that lacks all sense of history.

The image “https://i2.wp.com/i113.photobucket.com/albums/n216/cbrayton/fotos2FRoletaBicho.jpg” cannot be displayed, because it contains errors.
Vintage roleta with bichos. Source: Musem of the Policia Civil, Rio de Janeiro

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