Spain's Crisis Is Good for Cigarette Smugglers

Like millions of Spaniards, Alicia García has been forced to make sacrifices because of the country’s debt crisis. The 32-year-old beautician used to smoke up to a pack a day, but now she’s down to just five cigarettes. “Smoking has just become way too expensive,” says García, as she stands on a street in downtown Madrid puffing away. “I’ve got to think twice before lighting up.”

Squeezed by a deepening recession and higher excise taxes, Spain’s 10 million-plus smokers have become ripe targets for cigarette smugglers. Illegal imports now account for 7 percent to 8 percent of overall cigarette sales, compared with nearly zero a year ago, according to the country’s tobacconists’ association. The number of cigarette packs sold in Spain fell 17 percent last year, according to the Tobacco Market Commission, which tracks only legitimate commerce. “Smuggling and fake tobacco, which had been eradicated since 1993, came back strongly last year,” says Jaime Gil-Robles, corporate affairs director at Altadis, the local unit of Imperial Tobacco Group, which has one-third of the €11.3 billion ($14.8 billion) Spanish market. In a single week last month, Spanish tax authorities seized more than 1 million illegal packs of cigarettes worth about €4 million.