Grey Markets in Latin America: The Silent Threat Eroding Your Brand

In today's global economy, driven by innovation and intellectual property, illicit trade represents a challenge of monumental proportions for both the private and public sectors. In 2021, counterfeit and pirated goods accounted for "up to 2.3% of global trade" (OECD/EUIPO, 2025, p. 3). For entrepreneurs and decision-makers in Latin America and the Caribbean, this is not merely an isolated customs issue, but a direct strategic threat that silently erodes the value of legitimate brands.

Beyond Counterfeiting: The Grey Zone of Secondary Markets

When discussing illegal trade, the natural tendency is to imagine clandestine factories operating in total darkness. However, economic reality is more complex and is divided into dynamics that blur the line between informality and illegality.

To truly understand the scope of this phenomenon, it is vital to distinguish "the products that counterfeiters intended to sell on the primary market from those intended for sale on the secondary market" (OECD/EUIPO, 2019, p. 70). In the primary market, consumers are deceived. In the secondary market —where grey markets operate— consumers knowingly purchase unauthorized goods or counterfeits, driven by price gaps. Even when there is consumer complicity, the structural damage to the brand is profound.

The Latin American and Caribbean Landscape

Latin America and the Caribbean are highly vulnerable regions. Global distribution networks intertwine with free trade zones and logistical routes that facilitate the transit of illicit goods. Various countries in the region are documented on routes where regulatory vulnerabilities are exploited by illicit networks (OECD/EUIPO, 2016, p. 130). Strong demand for lower-cost goods and challenges in enforcing customs regulations create an ecosystem conducive to the prosperity of these markets.

Impacts: Erosion, Distortion, and Risk

The proliferation of these parallel markets is not harmless and directly impacts the economic viability of formal enterprises:

1. Brand Value Erosion: Intangible assets "play an instrumental role in rewarding the efforts of rights holders, innovators and investors" (OECD/EUIPO, 2016, p. 3). A grey market undermines this effort, diluting prestige and exclusivity. The negative impact on "the legitimate competitive advantage of right holders" ultimately affects "innovation, employment and long-term economic growth" (OECD/EUIPO, 2016, p. 5).

2. Price Distortion: The abundant supply of products in secondary markets creates a systematic distortion in value perception (OECD/EUIPO, 2019, p. 70). This exerts unsustainable pressure on brands to devalue their own products.

3. Reputational Risks: The infiltration of goods without traceability generates "adverse effects on revenue, the economy, health, safety and security for governments, businesses and consumers" (OECD/EUIPO, 2016, p. 5).

   
   

The Organized Crime Connection

It is a strategic error to conceive grey markets as the result of the simple survival of small informal traders. The evidence is conclusive: "organised criminal groups are considered to be playing an increasingly important role in these activities, by benefiting significantly from profitable counterfeiting operations" (OECD/EUIPO, 2016, p. 5).

Mitigation Strategy

Combating this threat requires a comprehensive vision and empirical data so that "policy makers formulate innovative policies to counter and deter this scourge" (OECD/EUIPO, 2016, p. 3).

At Strategos BIP, we understand that shielding your company requires superior intelligence. Therefore, we implement the Triangles Strategy, a public-private coordination model designed to close operational gaps. Through collaboration between the private sector, enforcement authorities, and strategic analysis, we secure supply chains and recover legitimate distribution channels. Proactive protection is the only guarantee for the secure growth of your business.

References

OECD/EUIPO. (2016). El comercio de productos falsificados y pirateados: Mapeo del impacto económico. OECD Publishing. https://doi.org/10.1787/9789264252653-en

OECD/EUIPO. (2019). Tendencias en el comercio de productos falsificados y pirateados. OECD Publishing. https://doi.org/10.1787/g2g9f533-en

OECD/EUIPO. (2025). Mapeo del comercio mundial de falsificaciones 2025: Tendencias globales y desafíos en la aplicación de la ley. OECD Publishing.