Economists use the concept of negative externality to explain the side effects of a market. It would be the unintended but inevitable consequences of a market. The impact of the action of an economic agent “A” on agent “B” unrelated to the activities of the market of “A”. Exemplifying. The objective of the mining market is the acquisition of minerals for economic development; the expected negative externality is some level of environmental impact – therefore, the population that lives close to the contaminated soil is affected by the action, even without having any relationship with this economic activity. That is why regulation by the State is fundamental to cancel or minimize these externalities. 

The sale of illicit products depends on the acquisition of these same products through theft, smuggling, trafficking, counterfeiting, among other crimes. The negative externality of the marketing of illegal products stems precisely from this crime associated with illicit trade, which also involves corruption, money laundering and homicides to keep the illicit markets in operation. These crimes together increase the risk of victimization, the degradation of the quality of life and the business environment in Brazilian society, through the damage, loss, fear, suffering and, at the limit, injured and killed people resulting from their operators.

Victimization of people, risk of lethality and degradation of quality of life – in addition to robberies followed by death, part of consummated or attempted homicides, rapes and assaults are carried out against victims of theft of products, such as vehicles or cell phones, whether on the street, companies and homes. The recurring armed clashes between criminals or the armed reaction of robbers, traffickers and smugglers against police forces raise the possibility of an honest citizen being incidentally killed or seriously injured in the main capitals. Contamination by consumption of counterfeit or adulterated products such as cigarettes, pesticides, beverages, toys and medicines is a form of silent victimization that affects mainly the poorest and most vulnerable, also preferential victims in human trafficking for sexual exploitation or modern slavery, operated by various criminal networks.

Victimization of companies, high level of losses and impact on competitiveness – the loss is the “illegal transfer” of assets from their legitimate owners to criminals through theft and cargo/stocks theft of companies in cities and rural areas; theft of use of licensed services and reception of its products; loss of intellectual property of products and brands of companies that have had their goods smuggled or counterfeited. These losses are compounded by the built-in cost of corruption of public and private agents, necessary to guarantee the “security of criminal networks”. The direct loss is complemented by the loss of markets for illicit traders, who capture part of the demand at attractive, but unrealistic prices. The increased risk of loss and the absence of public protection impose more costs on the productive sector, with private security and insurance, which are passed on to the final consumer, causing an increase in the final price of products and a reduction in the competition capacity of national products. This creates a cycle of inhibition of investment, which obviously also inhibits the emergence of new jobs. The Global Competitiveness Report of the Word Economic Forum ranked Brazil in 132nd position, compared to 141 countries, in the indicator that measures the impact of crime on business in 2019, a similar position in all previous editions of the report, launched in 2015. 

Victimization of the environment, fauna trafficking and loss of intangible public assets – Another type of illegal and harmful transfer of heritage arises from the victimization of the environment and artistic and cultural goods, such as the sale of illegally harvested wood and the illicit trafficking and sale of works of art, rare books, monuments / historical objects, of high aggregate  value. The National Network to Combat Trafficking in Wild Animals informs that the illicit fauna and flora market generates around 10 to 20 billion dollars a year in the World, and Brazil would contribute with around 5% and 15% of that total, especially with the illicit poultry trade. In addition to the destruction of wildlife and the scientific, artistic and cultural damage that this type of illegal exploitation causes, there are losses in the potential for biodiversity, for tourist attraction and especially for the country’s socio-environmental responsibility, a fundamental conditional element for international trade, especially in agricultural commodities. Even humanity’s ancestral relationship with animals is victimized by illicit markets that involve domestic animals for commercialization or for exploitation of them in illegal and cruel games, such as dog and cock fighting.

Anomie – when the State, through its criminal justice system, is no longer able to provide protection to prevent society to fall victim of the actions of illicit markets and fails to provide justice to those who were victimized, a state of social and institutional anomie is established, which favors the sedimentation of the illicit economy, the destabilisation of governments and states. Anomie means, etymologically, the absence of law. In society, the most common evidence is the naturalization of the supply and consumption of illicit products, demonstrating the low cost of crime. The purchase of illicit products and services is seen simply as a “good deal”, as an “option”, given the attractive price. The trail of crimes, suffering and illegalities that a stolen cell phone, a counterfeit piece of clothing or a smuggled pack of cigarettes has caused is ignored. In control institutions, the evidence of anomie is the naturalization of internal inefficiency and corruption. The absence of effective legal and structural tools to combat and control crime weakens the internal commitment to results, creating incentives for chronic inefficiency and corruption. It turns the lives of public officials, the overwhelming majority honest and dedicated, into a real ordeal.

The reversal of this situation requires updating and modernizing the criminal justice system to recover its ability to impose costs on crime, especially those dedicated to the supply of illicit products.