Philip Morris Closes Plant in Uruguay Due to Anti-Smoking Law

Oct. 24, 2011
Company said 'extreme' tax and regulatory measures had 'shifted market dynamics.'

Philip Morris International said on Oct. 21 that it would close its plant in Uruguay after filing a lawsuit against the country's anti-smoking laws.

"The wide availability and presence of illegal products on the market, combined with reduced demand and regulatory and fiscal measures that limit the ability to market our products profitably, have made the plant's operation no longer viable," the company said.

Nicolas Echeverria, general manager of PMI subsidiary Abal Hermanos, said that "extreme" tax and regulatory measures had "shifted market dynamics."

The factory closure will trigger layoffs for 62 workers at the plant.

Abal Hermanos products will now be manufactured at PMI facilities in Argentina, the company said, adding that it would continue selling its products in Uruguay and keep 28 employees there.

In March 2006, Uruguay became the first Latin American country and the fifth nation worldwide to implement a ban on smoking in enclosed public places. It also enacted some of the world's toughest tobacco laws, requiring large health warnings on packages and banning advertising and the use of multiple products for one brand.

Abal Hermanos, which had an estimated 21.7% market share in Uruguay last year, said the measures had forced it to withdraw seven of twelve types of Marlboro cigarettes that represented 40% of sales for that brand.

In early 2010, Philip Morris filed a complaint with the International Center for Settlement of Investment Disputes of the World Bank, seeking damages allegedly caused by Uruguay's anti-tobacco measures and claiming they violated a bilateral investment treaty and harmed the company. The country's Supreme Court later dismissed the constitutional challenge.

Montevideo has since received broad support for its move from the World Health Organization and international NGOs.

Copyright Agence France-Presse, 2011

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