A recent study of the illicit liquor market in six countries in Latin America documents the size and scope of a lucrative regional industry for criminal groups that accounts for hundreds of millions of dollars in lost state revenue each year.
Euromonitor International (pdf) examined the volume and value of illegal alcohol sales in Colombia, Ecuador, El Salvador, Honduras, Panama and Peru, finding that in 2012 this market accounted for a total fiscal loss of $736 million in these countries, with contraband and counterfeit products the principal contributors.
During 2012, illegal alcohol represented 25.5 percent of the total alcohol market in volume and 14.1 percent in value.
The average retail prices of illegal booze was found to be 30.3 percent lower than that of legal products, with smuggled alcohol sold at lower prices to undercut the legal market.
According to the report, these prices gaps, coupled with a lack of controls on residual ethanol supplies and weak law enforcement in the region, are key drivers of the trade.
Of the six countries, Colombia was found to have the highest value illegal market in 2012, worth over $1 billion in retail sales, which resulted in a total fiscal loss of $468 million. Peru's illegal market share, meanwhile, was the highest in the region, worth over 30 percent of the total liquor market.
InSight Crime Analysis
Latin America is home to a thriving trade in illicitly conceived liquor. In Colombia particularly, weak border controls contribute to a massive influx of contraband goods into the country, while adulterated liquor is also an important source of profit for criminal gangs.
The illegal alcohol trade is just one of a plethora of pirated and counterfeit goods markets in Latin America, prominent among them fuel smuggling and contraband cigarettes. At the beginning of 2014, Colombia's tax and customs police were seizing nearly $300,000 worth of contraband a day.
These markets offer appealing money-laundering opportunities for criminal groups, such as the Urabeños and Rastrojos, who are believed to control some of the flow of smuggled goods into Colombia.
SEE ALSO: Coverage of Money Laundering
Venezuela is a major source of contraband goods, a phenomenon facilitated by government price and currency controls, which offer great potential for profit in neighboring countries. Free trade zones like the one in Colon, Panama are also attractive sources of cheap liquor and cigarettes.