Brazil is seeing a rise in smartphone smuggling, with one in every four devices sold entering the country through illegal means, according to numbers from analyst firm IDC announced by the Brazilian Electrical and Electronics Industry Association (Abinee).
Most smuggled phones find their way into Brazil through Paraguay and are mainly from Chinese brands such as Xiaomi, Oppo, and Realme. These brands are the main focus of the so-called "grey market," with lower-cost devices.
According to Abinee, the percentage of phones sold illegally in Brazil grew steadily and at an unprecedented scale. The percentage of devices sold in the grey market went from 9% of all devices sold in the first quarter of 2023 to 25% in Q4, the equivalent of 6.2 million smartphones sold through irregular means. The number, the entity noted, equals 10% of the total national smartphone market.
“This is a practice that is becoming widespread and taking on unacceptable proportions,” said Abinee president, Humberto Barbato. “We need more energetic actions from the government to curb this practice.”
Problems relating to the smuggled devices, according to Abinee, include the lack of certification from the National Telecommunications Agency (Anatel), as well as the absence of manufacturers guarantees or technical assistance. The smuggled devices also do not undergo safety or operational tests.
All of these issues harm consumers, the entity noted, since buyers are often misled by information published by marketplaces, which are the main buying channels for the smuggled phones. Devices are transported from Paraguay into Brazil, where inspection and seizures often take place, but Abinee argues this is not enough:
"Only effective supervision of marketplaces will be able to curb the irregular practice," the association noted. Some digital platforms have been engaging with the platforms under an anti-piracy plan to block the sale of illegal devices, but according to Abinee, formal agreements have yet to be reached with the largest marketplaces operating in Brazil, Mercado Livre and Amazon.
Smartphone smuggling has broader impacts on the economy, the association said, noting that Brazil will lose 4 billion reais ($791 million) in 2024 due to tax evasion, with around 400 million reais ($79 million) worth of research and development investments no longer being made by manufacturers.
Moreover, the association estimates the impact on employment could be equivalent to 10,000 direct and indirect jobs impacted by smuggling. “The entry of goods into the country, without paying taxes, is an illicit practice which encourages organized crime, corruption, and violence not only on our borders but throughout the country,” Barbato noted.