IL Postcard

Proposed U.S. Tobacco Tax Will Help Kids, Harm Nicaragua's Cigar Industry

Date: 08/15/2007

Makers of some of the world's finest cigars are warning that a new tobacco tax under debate in U.S. Congress could harm the livelihoods of thousands of Nicaraguan workers. But lobbying against the tax will be about as popular in the U.S. as kicking puppies.

The proposed tax increase, which was approved by the U.S. Senate on Aug. 2, is meant to fund a special health insurance program for children, making it especially popular among lawmakers and the American public.

The exact tax figures are still being debated, but initial estimates suggest that cigarettes will jump by 61 cents and cigars by as much as $10 each, essentially doubling the price of some Nicaraguan-made puros (cigars).

The Nicaraguan Cigar Association is urging the Ortega administration to speak out against the proposed U.S. law, warning in a statement that the tax could harm the "national interest." The head of Nicaragua's National Assembly, Renee Nuñez, is expected to visit Washington, D.C., to lobby against the tax.
Cigar makers claim that the new bill "contradicts" the Central American Free Trade Agreement (CAFTA), which eliminated tariffs on tobacco and cigars that are sold to the U.S.

But experts say that the proposed tax will only violate CAFTA if it is executed in a "discriminatory fashion," meaning that taxes are fine as long as they apply equally to American and Nicaraguan tobacco products.

Still, the tax is expected to be hard felt in Nicaragua, especially now that local tobacco growers are showing strong signs of growth. Out of the magazine Cigar Aficionados' top 25 ranked cigars, 11 contain tobacco from Nicaragua.

Your Latin America Insider,

Suzan Haskins
for International Living

P.S. Even if you don't smoke, there's a lot to like in Nicaragua….