CBC International Expansion

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CBC International Expansion:
With its growth, social responsibility and commitment with international security must increase

Pablo Dreyfus
Research Coordinator
of Viva Rios’s Weapons Control Project
with the contribution of
Júlio Cesar Purcena, Researcher of Viva Rios’s Weapons Control Project

In 2007, according to information from Comtrade, a UN commercial transactions database, Brazil exported around 84 million dollars in small weapons ammunition 1. This amount represents approximately 6.4 percent of the global small weapons ammunition exports in this year, being last data available from Comtrade. 2 Brazil, according to Small Arms Survey, is among the 6 main exporters of light weapons and ammunition and in 2007 3 42 percent of the Brazilian small arms exports; light weapons, parts and ammunition had corresponded to the exports of ammunition for small weapons. 4

To talk about small arms ammunition production and exports in Brazil is equivalent to talking about the Brazilian Company of Cartridge (CBC - Companhia Brasileira de Cartuchos ) the company maintaining monopoly in this country. This means that CBC exported in 2007, 6.4  percent of the global ammunition exports.  Beyond having consolidated markets in United States, Europe and Latin America, CBC is expanding by purchasing other companies. For example, in 2007 CBC bought the German ammunition company Metallwerk Elisenhutte Nassau (MEN). 5   However, it was in 2009  that CBC became a true worldwide giant of the ammunition with the acquisition on March 31st, of the totality of shares from Sellier Czech & Bellot (S&B) company and from April 1st, integrally assumed the management of this company. With this purchase CBC, the leading company in Latin America, starts to control the production of one of the biggest European companies of small arms ammunition and one ofthe greater worldwide exporters. S&B, which exports 70 percentof its production, longs for reach 41 million dollar in sales in 2010. 6

However, a pertinent question for the public security in Brazil and Latin America is: which are the destinations of these exports now that the S&B is under CBC control? This question is raised due the following reasons:

It as have already been showed by academic research and police and parliamentary inquiries during the 90’s, one of the great sources of weapons and ammunition supply for illegal markets in Brazil is , indirectly, the Brazilian industry itself. 7

The so-called “boomerang effect”: weapons and ammunition “made in Brazil” were legally exported to countries with very extensive and porous borders and with little control on where they were bought legal or illegally and later trafficked illicitly inside Brazilian territory. Indirectly and involuntarily during this decade companies as Taurus and CBC supplied weapons and ammunition to drug gangs in large Brazilian cities. The paradigmatic case was Paraguay where, up to 2002, foreign tourists or foreign in transit could buy weapons and ammunition by simply presenting a photocopy of their identity. This situation starts to change at the beginning of this decade, when Paraguay and neighbour countries started to implement new legal measures of control. 8

Among the most efficient measures to prevent this boomerang effect of  export of Brazilian weapons and ammunition to bordering countries, was the adoption, in June 2001, of a resolution of the Ministry of Development, Industry and Foreign Commerce of Brazil, which imposed a quota of 150 percent in small arms and light weapons, its parts and ammunition exported by countries in South America, Central America, and Caribbean, with the exception of Argentina, Chile and Equator, and the exports for authorized users with certification of final destination or armament for the Armed Forces or police institutions of countries from these regions.

The reason of this export quota was to prevent the export of Brazilian weapons for areas or countries where exist the risk of deviation for the crime or for conflict areas. Argentina and Chile had been exempt because they possess laws and severe weapons control measures. Moreover, Chile and Equator are the only South American countries that do not possess borders with Brazil. However, the measure was directed specifically for Paraguay, the biggest importer (after U.S.A.) of Brazilian small weapons during the nineties. 9 The commercial exports of weapons and ammunition from Brazil to the bordering countries stopped in 2001 and in this way the boomerang effect of the ammunition of national origin diminished. As consequence of this quota CBC lost commercial markets in Latin America, but Brazil won in public security.

However, international ammunition traffic continues through the porous borders of Brazil with its neighbours. According to a field research carried out in 2006 regarding the Brazilian borders with Paraguay, Uruguay, Bolivia and Argentina, identified vulnerabilities that allowed the easy purchase of ammunition in these neighbouring countries. 10 The Brazilian ammunition started to be substituted in the stores at the borders for ammunition imported from other countries. Observations of this field research in 2006 for example, evidenced sales of ammunition: Argentines (Military FLB/Fabricaciones), Spaniard (Saga and Armusa), Phillipino (Armscor), Hungarians (MFS), Israeli (Samson), Mexicans (Águila), and Czechs (S&B) in weapons stores and in “shopping centers” of Ciudad del Este and Pedro Juan Caballero, two areas identified as intense contraband points of all type of products. 11 Rio de Janeiro state police identified the increase of the apprehension, in the operations against the drugs traffic, of the S&B ammunition at the beginning of this decade. 12

According to information presented in the international seminary “International Trends in Production, Ammunition Commerce, Use and Consumption for Small Weapons e Light Armament” ,organized in Rio de Janeiro by Viva Rio and Small Arms Survey on March 27 and 29, S&B also was identified as one of the marks more currently apprehended by the Federal Police in border areas and by the Rio de Janeiro police in operations against drug trafficking.

Within a sample of 10,822 cartridges of all brands and bores apprehended in the city of Rio De Janeiro between 2000 and 2005, analyzed by experts of Carlos Éboli Criminalistic Institute (ICCE) from The Civil Police Department of the Scientific Technician Police (DPTC-PCERJ), 4.2 percent are of the S&B brand; having the year of 2003 as peak, when it reached 6 percent of this sample. The percentage evolution of the S&B brand in the total of ammunition apprehended is represented in the graph below.

Rio de Janeiro: sample of seized Sellier & Bellot rounds, 2000 - 2005.

Source: elaborated from data from Carlos Éboli Criminalistic Institute (ICCE)/Department of Technician-Scientific Police of the Civil Police of Rio De Janeiro.

Occasionally, the seizures increase in accordance with the increment of Czech ammunition imports by  Paraguay. Talking about Czech ammunition is talking about S&B ammunition, a company that dominates the market in this country. The graphs below show the evolution of imports by Paraguay of Czech ammunition in values (represented in the red curve) and S&B ammunition in amount at the same period:

Paraguay: imports of small arms ammunition in constant USD (2007), 1983 - 2007.

Note:
89463 (sportive and hunting ammunition), SITC 2;
89122 (shotgun shells) and 89124 (small arms ammunition), classification SITC - 3;
9306.21 (shotgun shells) and 9306.30 (small arms ammunition), classifications SH 1992, 1996 and 2002.
Source: elaborated from the database NISAT, according to Comtrade information.

Paraguay: small arms ammunition imported from Czech Republic in millions of units, 1998 - 2006.

Source: Elaborated from OCIT and Urunet data, according to customs information.

According to customs data supplied by foreign commerce companies OCIT Foreign Trade and URUNET Foreign Trade Statistics, between 1998 and 2006 Paraguay imported commercially, , little more than 40 million S&B rounds of all calibres (of restricted and allowed use). The great imports (annual average of almost 7 million rounds between 1998 and 2004) were interrupted in 2004. However, 40 million rounds represent an important supply in stores of Paraguay border, a country where the legislation does not clearly establish the limit of rounds amount that can be bought by a single person. 13   In 2006, according to the last S&B ammunition imports registered by Paraguay, 8 thousand rounds had entered the country. It is important to point out that, in 2004, the Czech Republic was admitted as member of European Union. This implies that the country must follow the European Union (UE) Code of Conduct regarding to weapons export, that states in its “criteria number 7” that the UE countries, before authorizing exports of weapons and ammunition have to evaluate the existence of the risk that the armament can be diverted, in other words, re-exported undesired conditions. They must evaluate the risk that exported products can be deviated to undesirable final destination.

The CBC nowadays is the owner of another big leader company with headquarters in the Czech Republic. This, beyond expanding CBC commercial horizons, will allow, indirectly, through Sellier & Bellot, to export  to commercial markets in Latin America that today are barred by the 150 percent tax for Brazilian exports for the region. However, it is pertinent to remember that in the case of a lethal product, as ammunition, the bigger the company the bigger its responsibility with global security, especially in Latin America, a region in which in this decade concentrated 42 percentof all firearms homicides in the world. CBC as controller of Sellier & Bellot a company headquartered in EU, will have to evaluate the UE Code of Conduct and will have to consider the risk that some of these export end up, via diversions, feeding violence  in Brazil. 

1 Data from the Norwegian Initiative on Small Arms Transfers (NISAT), www.nisat.org for foreign commerce base of small weapons
2 According conversations with Nic Marsh, project leader of NISAT, in 2007, ammunitions transfers reached 1.3 billion US dollars.
3 Small Arms Survey, Small Arms Survey 2006: Unfinished Business, Oxford University Press, Oxford, 2006, p.68 Dados da base de comércio exterior de armas pequenas da Norwegian Initiative on Small Arms Transfers (NISAT), www.nisat.org
4 Data from the Norwegian Initiative on Small Arms Transfers (NISAT), www.nisat.org
5 “CBC acquires Czech company Sellier & Bellot”, Brazilian Company of Cartridges, http://www.cbc.com.br/noticias/CBC%20adquire%20empresa%20tcheca.php?acao3_cod0=badf93d7ba01b73f32d524bb132a3cc8
6 Sellier & Bellot, Business activities, http://www.sellier-bellot.cz/sellier-bellot-bussiness.php
7 See: Dreyfus, Pablo and Rangel Bandeira, Antonio, Vencindario Bajo Observación: Un estudio sobre las “transferencias grises” de armas de fuego y municiones en las fronteras de Brasil con Paraguay, Bolivia, Uruguay y Argentina, Rio de Janeiro, Viva Rio, 2006; available in: http://www.comunidadesegura.org/files/active/0/Observando_Vecindario_esp.pdf
8 And House of Representatives. 2006. Report of the Parliamentary Inquiry Commission destined to investigate  the Criminal Organizations of the Weapons Traffic (CPI do Trafico de Armas'). Brasilia: Parliamentary Inquiry Commission.
http://www2.camara.gov.br/comissoes/temporarias/cpi/encerradas.html/cpiarmas/Relatorio%20Final%20Aprovado.pdf
9 See: Available at: Ministry of Development, Industry and Foreign commerce, Chamber of Foreign Commerce, Resolution N º 17, of  June 6 2001, http://www.desenvolvimento.gov.br/arquivo/legislacao/rescamex/2001/rescamex017.pdf;
Ministry of Development, Industry and Foreign commerce, Secretariat of Foreign Commerce, Consolidation of Portarias SECEX (Exportation), Portaria N º 15 of   November 17, 2004 (with the alterations promoted until Portaria 39 Secex n º /2005), Annex “C” Exportation of Products Submitted to Special Procedures http://www.desenvolvimento.gov.br/arquivo/secex/conproexportacao/consolidacao.pdf;
Ministry of Justice, Council of Human Rights Defense, 126° Usual Meeting of the Council of Human Rights Defense, P. 4, http://www.mj.gov.br/sedh/cddph/pdf/ATA%20%20126.pdf; “Commerce of Weapons”,  Security Newspaper, http://www.jseg.net/notas77.htm; Dreyfus, Pablo, Lessing, Benjamin and Purcena, Júlio Cesar, “The Brazilian industry of light arms small weapons : legal production and commerce”, In Rubem Cesar Fernandes, Brazil: the weapons and the victims, Rio De Janeiro, 7 Letters, 2005, pp. 103-104 Dreyfus and Bandeira, op.cit., pp. 13-36 8

10 Dreyfus and Bandeira, op.cit., and House of representatives, op.cit.
11 See: House of Representatives, DEPARTMENT OF TACHYGRAPHY, REVISION AND WRITING. FINAL WRITING NUCLEUS IN COMMISSIONS, TEXT WITH FINAL WRITING, TRANSCRIPTION IPSIS VERBIS, CPI-TRÁFICO DE ARMAS, Nº 0620/05 of the 18/5/2005; p.34 available in: http://www.camara.gov.br/internet/comissao/index/cpi/trafiarmas_nt180505.doc
12  See: House of Representatives, DEPARTMENT OF TACHYGRAPHY, REVISION AND WRITING. FINAL WRITING NUCLEUS IN COMMISSIONS, TEXT WITH FINAL WRITING, TRANSCRIPTION IPSIS VERBIS, CPI-TRÁFICO DE ARMAS, Nº 0620/05 of the 18/5/2005; p.34 available in: http://www.camara.gov.br/internet/comissao/index/cpi/trafiarmas_nt180505.doc
13  Dreyfus and Bandeira, op.cit. pp.13-36 epp.69 to 71