According to the Pan American Health Organization (PAHO), the prevalence of informal or illicit alcohol consumption increased during the pandemic, from 1.9% to 3.0% weekly in Latin America . Part of this growth is due to unintended consequences. Governments in the region sought to reduce the harmful use of alcohol to ease pressure on health systems saturated by the pandemic.
However, some of them implemented policies that produced counterproductive effects, inadvertently prompting consumers to resort to the most accessible “solutions”, such as counterfeit or contraband alcohol. Although regulatory policies varied by country, the goal was to discourage people from organizing or attending social gatherings through tax increases, dry laws, or sometimes a total ban on alcohol.
The human and economic cost
Illicit alcohol consumption is a serious public health problem worldwide. The figures are especially worrying in Mexico, where approximately 42.5% of total national alcohol sales come from illegal sources, making it the largest illicit market in Mexico. Latin American alcohol by volume . People who survive illicit alcohol intoxication are often forced to live with long-term debilitating side effects for the rest of their lives, such as blindness and permanent neurological damage.
Since illicit alcohol is produced without the quality controls and systems used in the legitimate supply chain, its consumption often leads to unnecessary illness and death . The Dominican Republic was severely affected between 2020 and the first half of 2021, with almost 450 people who sadly died from drinking adulterated alcohol . About one in three alcoholic beverages that sold there is illegal . It is important to note that, although beer is the most consumed alcoholic beverage in the region, distilled beverages are those that prevail in the illicit sector, with a 92% market share .
Illicit alcohol also poses a great economic burden. Of the 15 million hectoliters consumed in Latin America each year, 14.5% comes from the illegal market. This is equivalent to an estimated loss of $ 1.7 billion in tax revenue .
The power of price
The recent Forum on the Illicit Trade in Alcohol in the Dominican Republic offered many interesting insights, the most important of which concerned the power of price. As the International Alliance for Responsible Drinking (IARD) reports, “Price is one of the main drivers of illicit alcohol consumption, and high taxes on regulated and branded products can encourage unregulated alcohol trade and growth. of the gray or black markets. “
In other words, an unfavorable tax framework for this industry has the opposite effect that regulators hope and desire. Instead of reducing consumption and keeping the population more protected, higher taxes and consumer prices end up fostering illicit production and black markets.