How does smuggling affect Colombian companies?

Illicit trade and smuggling in Latin America and the Caribbean have become structural phenomena that go beyond the informal economy and are intertwined with transnational criminal networks. According to the Latin American Anti-Smuggling Alliance (ALAC, 2024), this illegal market moves more than US$210 billion in products every year, equivalent to 2% of regional GDP. This magnitude shows that its expansion is not circumstantial, but responds both to historical failures in trade control systems and to the growing sophistication of the criminal organizations involved.

In this regional context, by 2022 smuggling in Colombia exceeded US$8.8 billion —around 10% of the value of legal imports, according to the DIAN— with a marked predominance of technical smuggling. This mechanism, which takes the form of manipulating or falsifying information in import declarations, accounted for about 90% of the total value of smuggling between 2018 and 2022, with an annual average of US$6,234 million.

This dynamic is reinforced by structural factors specific to the country. The complexity of smuggling in Colombia is aggravated by its geography: the long and porous land border with Venezuela, Brazil and Ecuador facilitates the movement of illegal goods, while strategic ports such as Buenaventura and Barranquilla have become critical nodes for the entry of high-value goods from countries such as China, the United States, Bolivia, Panama and Brazil. These routes are exploited by criminal groups that see smuggling as a low-risk, high-profit business, with lower levels of prosecution than other transnational crimes.

Beyond its commercial effects, smuggling also plays a key role in criminal economies. A particularly worrying aspect of money laundering is the role this phenomenon plays, since it allows criminal organizations to integrate illicit funds into the formal economy through foreign trade operations that appear legitimate or are difficult to trace. Through these mechanisms, proceeds from activities such as drug trafficking, illegal mining, extortion or arms trafficking are not only laundered, but also facilitate the expansion and diversification of criminal structures.

These practices are not abstract; they materialize in concrete schemes. As we have been documenting since 2022, a transnational money laundering chain based on cigarette smuggling and linked to drug trafficking has been identified. In this scheme, cocaine produced in Colombia is shipped to Mexico and the United States, where criminals obtain the initial capital; it is estimated that roughly half of these funds remain abroad as a bargaining tool in the event of capture and extradition, while the rest must be incorporated into the economic system. To do so, drug traffickers invest those funds in illicit tobacco from South Korea, Paraguay, Uruguay, China, India and the United Arab Emirates, which is transported in containers to Panama. There, the goods are deconsolidated and repackaged in free trade zones, and then distributed to Colombia, Aruba, Curaçao and Venezuela, where they are broken down again for domestic consumption or re-export, mainly to Ecuador. Finally, in the destination markets, criminal organizations recover their capital with profits, already laundered through the financial system.

As a result of these dynamics, the impacts of smuggling on the national productive sector are deep and multidimensional. First, they create unfair competition against formal companies, which do comply with tax, labor and regulatory obligations. The massive entry of under-invoiced, counterfeit or low-quality products erodes the margins of domestic producers and damages brand reputation, undermining consumer trust and exposing the population to health and safety risks. Sectors such as food, medicines, cosmetics, tobacco, alcoholic beverages, auto parts and textiles are particularly vulnerable to these dynamics.

In addition, smuggling weakens incentives for local production, displaces formal employment and reduces the competitiveness of the business fabric. Indirectly, it limits the State's capacity to finance public policies through tax collection, while strengthening the criminal economies that operate in border and logistics corridors.

At Strategos BIP, we understand that confronting illicit trade requires comprehensive approaches that combine strategic intelligence, risk analysis and inter-institutional coordination. That is why we work actively in Colombia and other countries in the region to support companies in identifying, mitigating and managing the risks associated with illicit economies and criminal structures that affect their operations.

In this vein, we promote a regional approach reflected in initiatives such as the Triangles Strategy, a platform that brings together government authorities, international organizations, universities and companies from 17 countries, from Mexico to Argentina. Its purpose is to reduce the incidence of illicit trade by dismantling criminal structures, generating evidence to improve public policies and regulatory frameworks, and raising public awareness of the impacts of smuggling on economic development and security.