For criminals, pirating products pays

It could be a chapter in the war on drugs. Instead, it's a tale of counterfeit goods and piracy of music, movies and software. Three downtown shopping areas here sell only counterfeit, pirated and smuggled goods. These open marketplaces only appear to be the province of scrappy independent operators.

''Behind this is organized crime, mainly Chinese mafia,'' said Medeiros, a legislator from here who led a congressional investigation of intellectual property crimes. A bodyguard hovered at a discreet distance.

Crime lords around the world have discovered that stealing intellectual property can be more profitable and less risky than drug trafficking.

Brazil is an important producer and destination in the global piracy market, draining billions of dollars from U.S. companies, eliminating jobs and raising prices for legitimate products.

U.S. entertainment, books and software companies estimate losses of nearly $1 billion a year to piracy in Brazil.

Brazil loses as well, an estimated two million jobs, Medeiros said.

''Look at our shoes,'' said Roberto Giannetti da Fonseca, president of Brazil's Foreign Trade Center Foundation. 'Chinese factories are producing exact copies that even say, `Made in Brazil,' and exporting them to us.''

BUSINESSMAN ARRESTED

Last year, police arrested a prominent Chinese-Brazilian businessman, Law Kin Chong, and charged him with offering $2 million to Medeiros to go easy on him in the congressional probe.

Medeiros said Law was the biggest trafficker in counterfeit goods in Brazil.

After Law's arrest, police raided a warehouse containing 7.5 million blank CDs and 3.5 million blank DVDs.

The police said Law's operation supplied more than 10,000 pirate vendors in Brazil, including vendors at malls he owned. Medeiros said the case has also led to the arrest of more than 30 police officers in Sao Paulo.

''All of Law's personal security detail were policemen,'' he said. ``When we met, we were surrounded by policemen -- Law's policemen and my policemen.''

CLAIM OF INNOCENCE

The case has not gone to trial. Law waits in a prison in Brasilia. His attorney, Luiz Fernando Pacheco, said that Law is an innocent victim of congressional harassment and that Medeiros solicited the money.

Medeiros, a former boss in a metalworkers' union, decided two years ago to investigate piracy because it was costing Brazilians jobs.

He was made chairman of a Congressional Parliamentary Inquiry, which held hearings, prodded police and issued a scathing report last summer.

Under pressure from the committee, police raided a Sao Paulo mall owned by Law in March 2004 and seized 5,000 sacks of counterfeit and smuggled goods worth $2.5 million. The mall rents to businesses that are responsible for their products, Pacheco said, but those who sell pirated goods are fined or forced out by management.

''If they can't get this guy, then what hope do we have?'' said Eric Smith, president of the International Intellectual Property Alliance, which represents entertainment and software companies that have urged trade sanctions against Brazil for doing too little to enforce anti-piracy laws.

Brazil's population of 186 million people, including 70 million middle-class consumers, makes it Latin America's biggest market for counterfeit goods. Industry representatives say the biggest pirate manufacturing centers are in China, Russia, Taiwan and Hong Kong. Crime syndicates in Brazil have Chinese factories providing merchandise.

''For minimal investment, you can open an optical disc factory and crank out millions of units a year, with a 10,000 percent profit,'' Smith said.

But Brazilians have been slow to recognize intellectual property theft as a crime.

''Price drives consumers to pirate works,'' said Enoch Bruder, a Sao Paulo publisher. ``It wasn't felt to be a crime, or if it was seen that way, it was considered a romantic crime.''

Source: Miami Herald