[Intl-tobacco] WSJ: High-Powered Activists Persuade Brazil To Clamp Down on Tobacco Industry

[Robert Weissman]

High-Powered Activists Persuade Brazil To Clamp Down on Tobacco
Industry
Page One Feature
by JONATHAN KARP / Staff Reporter of THE WALL STREET JOURNAL
Source: The Wall Street Journal Interactive Edition, 2002-01-15

RIO DE JANEIRO -- When Brazilian smokers reach for a smoke later
this month, some of them will confront a vacant stare -- from a
gaunt, tube-fed baby in a photograph covering one side of their
cigarette pack.

With a caption alerting pregnant women that smoking can cause
premature, asthma-prone infants, the photo is one of several graphic
health warnings forced on tobacco companies by the Brazilian
government. The move is the latest in a blitz of stringent new
antismoking measures that aim to make Brazil, home to 170 million
people and at least 30 million smokers, a tougher place to sell
tobacco than the U.S., the European Union or just about anywhere
else. Only Canada already requires similarly graphic health
warnings.

Brazil also has ordered a reduction in cigarettes' tar and nicotine
levels and has banned terms such as "light" and "mild" from
cigarette packs, starting this month. In doing so, it is beating the
EU to the punch by nearly a year. Last year, Brazil instituted one
of the world's most comprehensive bans on cigarette advertising,
gradually forbidding it everywhere except the counters where
cigarettes are sold -- even on Brazilian-based Web sites.

Brazil has a big economic stake in tobacco, making it an unlikely
front in the global war against smoking. It is the world's
third-largest tobacco producer and top leaf exporter. Nearly two
million people, mostly small farmers, rely on the lucrative crop for
their livelihoods. Tobacco also helps fill government coffers: Taxes
claim about 70 cents of every dollar of cigarettes sales, and
British American Tobacco PLC's Souza Cruz SA unit is Brazil's
biggest private industrial taxpayer.

The country's antismoking drive is the product of a concentrated
two-year push led by two onetime student activists who first crossed
paths almost four decades ago, when one hid the other from
authorities after Brazil's 1964 military coup. José Serra, then on
the lam, now is Brazil's pugnacious health minister, who plans to
announce his presidential candidacy this week. Jacob Kligerman, who
provided the safe house, is an impassioned surgeon whom Mr. Serra
appointed in 1998 to head the National Cancer Institute, the
government's lead agency for cancer-control policy.

Together, the duo has moved Brazil with unaccustomed speed, with Mr.
Serra twisting lawmakers' arms -- or instituting executive fiats
where he can -- and Dr. Kligerman exploiting his medical and social
prominence for the cause from a government-funded pulpit. The pair
has even broached the taboo subject of moving Brazil away from
tobacco growing -- and tried to enlist the industry itself in the
difficult search for alternative crops.

The tobacco industry is fighting back -- with some success -- to
defend a tobacco-growing heritage so deep that tobacco leaves are
featured on state emblems of 19th-century Brazil. Cigarette makers
have mobilized farmers and cut prices on popular brands since the
advertising ban took effect last January. Souza Cruz, which controls
80% of the market, actually sold 6.3% more cigarettes in the first
nine months of the advertising ban than a year earlier. (Philip
Morris Cos., along with most of the rest, doesn't break out sales
figures by country.)

Souza Cruz has started to build public high-technology smoking
lounges designed to clear the air faster than smokers can cloud it
up. Philip Morris, seeking to build an association between Marlboro
and Brazilian pop culture, briefly funded a hip fashion magazine
before refocusing its efforts on sponsoring cultural events -- as it
still is allowed to do until next year.

The companies have a huge stake in finding more effective ways to
tap markets in developing countries. With smoking on the decline in
the developed world, they are adding factories from Brazil to South
Korea. They also are adopting such diverse local promotional
strategies as sponsoring "woman of the year" awards in Russia,
soccer teams in Africa and even a medical clinic in Hungary -- all
places where they expect smoking to grow. The World Health
Organization glumly agrees with that assessment; it estimates that
by 2025, 70% of all tobacco-related deaths will occur in developing
countries, up from 50% today.

If Mr. Serra and Dr. Kligerman succeed in their campaign, Brazil
could be a model for developing countries grappling with the dilemma
between promoting public health and economic growth. Government
officials from China, home to the world's biggest pool of smokers,
have visited Brazil for tips on tobacco control. The WHO appointed
two Brazilians to head its antitobacco efforts, including launching
negotiations on a controversial global antismoking treaty. The
world's developed and developing nations have yet to reach a
consensus on that treaty.

One of several warning labels on cigarette packs in Brazil starting
this month

For more than a decade, Brazil's cancer institute led the battle to
restrict the cigarette trade and smoking in public places. But by
May 2000, Mr. Serra and Dr. Kligerman were ready to shift the
campaign into high gear. On the United Nations' global "World No
Tobacco Day," they launched Brazil's blitzkrieg by invoking an
American icon: the Marlboro Man. Encouraged by the WHO, the cancer
institute flew in the brother of deceased Marlboro pitchman Wayne
McLaren, a lung-cancer casualty. Dr. Kligerman appeared with him to
launch a publicity tour and government-sponsored advertising
campaign designed to shatter the tobacco industry's portayal of
smoking as glamorous.

At the same time, Mr. Serra sent his Health Ministry's
tobacco-advertising ban to congress, ignoring naysayers and
employing an array of parliamentary maneuvers to keep the bill on
track. He collected enough lawmakers' signatures to force a vote
before they could move on to other business. When some politicians
tried to piggyback alcoholic beverages on the cigarette-ad ban, Mr.
Serra summoned party leaders to his office and bluntly told them,
"Whoever wants to introduce alcohol is actually working for the
tobacco industry."

Dr. Kligerman mobilized the cancer institute's nationwide grassroots
network for a huge mail and e-mail campaign. His private medical
practice had spawned a wealth of contacts that gave him access to
the media and politicians, some of whom had been his patients. That
gave Mr. Serra, the political tactician, all the more leverage.
"Every person you mention, Jacob has operated on his mother or
aunt," says Mr. Serra. "There is really a network. Doctors are
terrible in this way, but useful when they are on your side."

In a televised debate, Dr. Kligerman also drew on his credentials as
a 1960s activist to rebut the tobacco industry's argument that the
ad ban would violate its democratic right to free speech. "I asked
them: 'Where were you during the dictatorship?' " he says. "What
kind of freedom is the freedom to advertise a drug that kills?"

Dr. Kligerman, who is 61, traces his passion for fighting cancer
back to the age of six, when he watched his mother die, her belly
swollen from a tumor-ravaged colon. "From that day, I had a
mission," he says. "I vowed that I would be responsible for
resolving cancer."

The head-and-neck surgeon's work is dominated by tobacco-related
illnesses. Taking a break midway through a recent 10-hour operation
to remove a woman's pharynx, he pulled off his surgeon's mask and
remarked, "She smoked for 35 years."

Mr. Serra, 59, has taken on vested interests before: An
internationally trained economist who ties public health to economic
development, he became the nemesis of the global pharmaceutical
industry by threatening to break drug patents. The move secured
steep discounts on life-saving medicines for Brazil's acclaimed
AIDS-treatment program -- and favorable press at home.

Public opinion played a pivotal role in the decision to mount a
tougher antismoking campaign. Mr. Serra himself says he saw a "real
good opportunity" to push a popular cause when a poll in 1999 showed
support for tobacco control, though he denies that winning votes was
his aim.

Tobacco proponents aren't sure about his motives. "For us, health is
being able to eat. For us, tobacco is a remedy," says Hainsi Gralow,
president of Brazil's tobacco farmers' association, though lung
cancer is rife in the country's tobacco-growing regions. Mr. Gralow
asks: "Who benefits the most from tobacco control? Serra, because he
wants to be president."

Mr. Serra -- joined by Dr. Kligerman and cancer institute experts
for presentations to lawmakers -- pushed the antitobacco bill
through Brazil's lower house in less than three months. Then the
team went to work on crucial senators. When the cancer institute
sponsored an exhibition inside congress on smoking's ills, Mr. Serra
and Dr. Kligerman escorted the powerful senate president, who broke
down in tears because smoking had contributed to his son's early
death.

The tobacco lobby wrung a few concessions, such as postponing the
ban on sponsorships of cultural and sporting events until 2003. But
overall, the law signed last December is tougher than the U.S.'s,
and it took the tobacco industry by surprise. "The concentration of
activity, the way this legislation was introduced immediately,
worried us," says Milton Cabral, vice president of Souza Cruz. The
advertising ban, he says, was "a bit on the radical side."

Between January and May 2001, Mr. Serra -- employing the cancer
institute's recommendations -- ordered the phased-in reduction of
tar and nicotine, the removal of misleading terms such as "light"
and the addition of pictorial health warnings. Because the Health
Ministry used administrative orders, rather than legislation, the
industry didn't have any leverage to block the moves -- it could
only haggle over timetables and technical details.

The government's tactic was "unusual" because it acted without the
legislature, says Maria Claudia Souza, executive director of
Abifumo, the Brazilian tobacco manufacturers' lobby. By contrast,
she says, "in Canada, this was debated for years."

Just as quickly, Brazil has become one of the biggest markets for
tobacco lawsuits, as the government's campaign has perked up the
activity of plaintiff's lawyers. Souza Cruz, the target of more than
200 such suits, most of them since 2000, has won every case
completed so far.

Meanwhile, Souza Cruz and Philip Morris have struck back in the
marketplace. Along with the discounts on cigarettes, a weak currency
helped Souza Cruz boost exports. Its net profit in the first nine
months of 2001, the most recent period available, was up 52% from a
year earlier. In October the weak currency also forced Souza Cruz to
raise prices again.

Souza Cruz opened its first brand-name smoking lounge in December
2000, a week before the advertising ban was adopted, in a shopping
mall in the southern city of Porto Alegre. The wood-paneled refuge
with plush leather chairs could pass for an airport VIP lounge, and
a sophisticated ventilation system constantly cleanses the cool air.
Next door, a medical clinic displays its motto outside: "Tudo para
você viver melhor." ("All you need to live better.")

Tobacco executives claim that the government's campaign is helping
smuggling -- an argument it frequently makes in lobbying around the
world. Smuggled smokes have grown to account for 35% of Brazil's
market. The Finance Ministry says that smuggling of the cheaper
products costs it more than $500 million a year in lost tax revenue.
With Brazilian cigarette makers having to cut back on tar and
nicotine, "there is just another reason to buy contraband," says
Valter Brunner, director of corporate affairs at Philip Morris
Brasil -- a point Dr. Kligerman concedes.

The hardest challenge for Brazil's anticigarette forces will be to
uproot a deep, and lucrative, tobacco-growing culture.

For 10 years, Brazilian nonprofit and church groups have run
small-scale programs encouraging about 1,000 farmers to switch crops
or try new livelihoods, including clothing and cookie making. Mr.
Serra and Dr. Kligerman are trying to direct government agricultural
expertise and subsidies toward tobacco alternatives.

A government commission headed by a Kligerman lieutenant at the
cancer institute is exploring how to minimize the economic impact of
change. To confront the delicate subject head on, the commission
ventured to tobacco's heartland in southern Brazil last March to try
to gain tobacco growers' confidence.

But agents of the industry, suspicious that the Health Ministry
wanted to abruptly halt tobacco-growing, were lying in wait in Santa
Cruz do Sul, a prosperous city built by German immigrants and
tobacco profits. The first morning of their visit, each official
received a copy of that day's local newspaper, whose banner headline
-- "The Future of Tobacco Farming Threatened" -- was followed by
alarmist statistics. One noted that it would take 238 factories the
size of the area's new General Motors Corp. plant to employ the
half-million people farming tobacco in southern Brazil.

The dominance of small family-run tobacco farms, five acres on
average, makes it difficult to wean planters from a nurturing global
tobacco industry that increasingly contracts directly with farmers
and offers the most profitable crop. "I tried soy but didn't have
enough land. Then black beans, but the bank wouldn't finance such a
small plot," Alfredo Moitozo told the bureaucrats at his farm. By
contrast, Universal Leaf Tobacco Co. not only provides seeds and
technical assistance on credit, it buys his whole crop -- for nearly
10 times the price of beans.

The visiting officials, hosting a town meeting, faced a hostile
crowd. Local politicians, unionists and managers from multinationals
barraged them with tobacco's virtues: jobs, taxes, earnings from
Brazil's third-biggest farm export. Though tobacco represents just
1.5% of total exports, nearly 70% of Brazil's crop is sold abroad,
bringing vital income to local economies in the south.

Presiding at the meeting, Luisa Goldfarb of the cancer institute
urged farmers to look at a broader economic picture. Her argument:
Tobacco-control efforts around the world were sure to force a
decline in demand. It "isn't a problem that the Brazilian government
created," she said. "It's a global phenomenon."

After the meeting ended calmly, the bureaucrats left town. The
locals, meanwhile, chose to go their own way -- heading to a factory
owned by North Carolina-based Standard Commercial Corp. to celebrate
a new $10 million tobacco-processing line.