The amendment to the Chilean Tobacco Act - which establishes greater restrictions to the commercialization of products by tobacco companies - has caused quite a commotion. In response to the enactment of the statute, BAT Chile threatened to close-down its subsidiary.

July 2015. The Senate approved the first stage of the bill, adjusting the law to the standards set out by the Framework Convention of the World Health Organization for the control of tobacco. In Chile, the restriction entails the exclusion of selling cigarettes with certain substances and additives, such as menthol and vanilla, along with the obligation of using generic packaging, that is to say, "all brands (must have) common features". Likewise, the bill sets forth that boxes "must include a warning covering 100% of both main sides, prohibiting any action or element intended to partially or totally concealing the warning", all of which are situations which are very similar to the currently existing scenario in the food industry as a result of the recently approved Food Labels Act, also promoted by the Health Ministry.   

Via a press release issued through its website, company British American Tobacco Chile (BAT) - which carries brands Kent, Lucky Strike, Dunhill, Pall Mall, Belmont and Hilton - announced that it would be closing down its facilities located in the V, VI, VII, and VIII regions, along with its Casablanca factory, as a result of the changes to the Tobacco Act, a course of action that would entail a 20% reduction in work positions. In total, a US$ 400 million loss has been calculated, a decreased collection that directly affects governmental funds. 

 

According to the press release, the plain box and the prohibition of substances and additives are not requirements established by the Framework Convention for the Control of Tobacco issued by the World Health Organization and, thus, such change is an "arbitrary amendment". Finally, BAT Chile stated that "(...) as a result of the expropriation of trademark and use rights, the State must compensate the industry (...) This is the first time in the country's economic history that a law, in practice, would decree the closing down of a legal business enterprise".

 

Responding to the above, the Undersecretary of Health, Jaime Burrows, told CNN Chile that "we will not be intimidated, because more important and critical issues - such as health - are at stake (...)". On the opposite side, the Chairman of the National Chamber of Commerce, Ricardo Mewes, declared to El Mercurio that: "Our legislators are not aware that all measures and regulations and laws have consequences. In this case, the company will leave the country (...) it is a very bad sign for economic reactivation (...) this law will decrease the sales of formally established commerce and increase contraband".