Economy

Latin America's War On Tobacco, And The Toll On Local Growers

Drying tobacco leaves in Brazil
Drying tobacco leaves in Brazil
Carlos Tromben, Loreto Urbina, Graziele Dal-Bo and Susan Abad

SANTIAGO - In early November, a group of delegates from Latin America and Britain, all part of the British American Tobacco multinational, gathered in Rio de Janeiro.

The company said it was a routine meeting, and offered few details. The one thing we can know for sure is that if any of them smoked, they would have had to go to a special smoking area to light up.

Brazil does not allow smoking in closed areas, nor does it allow cigarette advertising at cultural or sports events. In Uruguay, cigarette sellers are not allowed to display cigarette packets.

“This is about more than just cigarettes,” says Lezak Shallat, coordinator of the organization Tobacco Free Chile. “It’s about protecting people from the advertising onslaught of junk food and other products that are not healthy.” Shallat says that the equation is simple: more regulations means less consumption and less cancer and heart attacks. But is that really the case in Latin America?

There was a golden era for smoking in Latin America, when lighting up was accepted (and even expected) at funerals, baptisms, in movie theaters and even maternity wards. The alarm was raised in 1964, when the U.S. Surgeon General presented a report about the effects of tobacco on health. At that time, 52% of Americans were smokers. Twenty years later, only 25% of the population smoked.

It’s still early to judge the effects of the new restrictions in Latin America. According to the Ministry of Health in Brazil, in 2011 the prevalence of smoking fell to under 15% of the population older than 15. No effect has been measured yet in Chile, the heaviest smoking country in the region.

The tobacco industry is one of the most centralized in the world. There are really only four brands that dominate the entire world market: BAT, Philip Morris International (PMI), Japan Tobacco and Imperial Tobacco.

Both BAT and PMI have focused their attention on places with high rates of smoking: Russia, Asia and Latin America. They have expanded into these markets mainly through acquiring smaller tobacco companies.

Today, most Latin American countries have extremely concentrated tobacco markets, when the market is not a complete monopoly. BAT dominates Brazil, Chile, Peru and Venezuela completely, while PMI rules over Argentina and Mexico. The two only really compete in Colombia.

Getting around restrictions

The tobacco companies have put into practice several techniques to get the most profit out of their products. PMI has sued the Uruguayan government at the International Center for Settlement of Investment Disputes, for their anti-tobacco regulations. BAT has done the same in Australia, which has the strictest anti-tobacco rules in the world. It’s a two-pronged game – trying to prevent restrictions while adapting marketing techniques to get around the ones that exist.

The companies have started marketing more at the point of sale, and have also used changes in packaging and the length of cigarettes to make them more attractive to consumers.

And it’s having results. The industry continues to post profits and have plenty of support from the stock market. The secret is to get more and more profit from each cigarette that is sold in this declining market. In other words, to carefully cultivate the industry’s most precious asset – the diehard smoker.

For Souza Cruz, the Brazilian BAT affiliate, the number of cigarettes sold annually dropped by 10% between 2007 and 2011, but profits soared. The company’s annual report says that this was due to a better mix of products and better prices. BAT’s stock prices have also risen, in spite of the general down market for stock prices. This has created a dilemma for some institutional investors – in 2010, the Norwegian government pension fund disinvested from all tobacco stocks, and the Australian government is studying the same possibility.

None of the BAT executives contacted by America Economia agreed to talk, and Souza Cruz said it did not have a spokesperson to comment on the recent government measures.

The main defenders of the tobacco industry are actually the people who sell the products directly. Convenience store owners in Peru are unhappy about regulations that prohibit them from displaying cigarettes in their stores. And tobacco farmers in Brazil were incensed when the government decided that they would have to diversify their crops in order to receive national agricultural subsidies.

Tobacco has allies in the parliament, too. “I don’t smoke, but what are we going to do with the 190,000 families in the south and the other 30,000 in the north that depend on tobacco?” asks Luis Carlos Heinze, a Brazilian federal deputy. He adds that it is a total of 600,000 families if you include indirect employment.

In Colombia, the opposite is happening – the government is encouraging tobacco crops in areas reclaimed from armed conflict. “Even if it’s true that it can harm health, that isn’t exclusive to tobacco. There are lots of other products that can be much more harmful,” says Heliodoro Campos, head of Fedetabaco. “Fortunately, the Ministry of Agriculture backs tobacco cultivation,” he adds.

While the Colombian peasants fight against drought and flood to grow their tobacco crops, somewhere in Chile a teenager lights his or her first cigarette. And in Brazil a 66-year-old man lights up his last. Cigarettes cost the Brazilian health system around $11 billion. Everywhere except Uruguay, cigarettes continue to share sales space with sweets and chocolates for kids.

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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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