Focus: Cigars

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Apr. 28, 2013

In 2012, the country earned $500 million through cigar exports, representing 5% of the Dominican Republic's total export basket. Additionally, tobacco products represent 8.5% of fiscal revenue on merchandise taxation. The sector also currently employs approximately 45,000 agricultural workers and generates around 120,000 jobs overall, according to the Tobacco Institute of the Dominican Republic.

The highest quality Dominican producers make hand-made cigars, using a blend of imported and locally grown tobacco—only 15% of tobacco used in the industry is Dominican, with other varieties imported from India, Pakistan, and Bangladesh. One of the country's prime producers of hand-made cigars is Tabadom, which is aiming to produce around 25 million cigars in 2013, one-third of which will be sold under the Davidoff brand. Hendrik Kelner, Director General of the company, highlighted Tabadom's preference for exports: “We only sell cigars to stores that have the conditions to preserve their quality, which sometimes can be a problem because there are not many stores that meet our requirements [in the Dominican Republic]." The company is currently seeing increasing demand from China, while the US remains the number-one destination for its exports.

Despite a successful year for exports in 2012, industry leaders became unsettled at news that Australia was preparing to introduce plain packaging laws to the tobacco sector. While a relatively insignificant market for Dominican producers, the government remains concerned that similar laws elsewhere may begin to harm exports. “We will lose our property rights; the brand name is the most important asset of any company," said Kelner. In order to protect its exporters, the Dominican Republic petitioned the World Trade Organization (WTO) in December 2012 to challenge the law and awaits a decision.

Another major exporter is Tabacalera de García. Also in the hand-made cigar business, up to 97% of its produce is exported, with the US and Europe the largest markets. However, Tabacalera de García is also considering entering the Asian market. “I believe that our exports to this area will become important for our foreign activities in the near future," said Javier Elmudesi, Factory Manager at the company. Indeed, Elmudesi is putting emphasis on training in order to maintain the highest quality. “We strongly invest in workforce capacity, putting a lot of emphasis on the cigar-making culture of the company," he added.

While domestic consumption is low, tourists offer the industry a chance to showcase itself. “In the Dominican Republic our biggest demand comes from tourists," mentioned Tabadom's Kelner, while Tabacalera de García's Elmudesi spoke about the company's investments in cigar tourism: “we offer limited tours around our production facilities, which has actually allowed many people to discover the wonderful cigar-making industry and the many people that it employs." Kelner, however, is positive about the local sector, believing that, while not his own business, an increase in machine-made cigars will help to boost not only local consumption, but also employment in the sector. “While machine made cigars are not our business, it is good for the country," he concluded.

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