Economic Policy

Mexico’s Tobacco Illicit Trade: A Costly Blow to National Revenue and Security

By Economics Desk | February 10, 2026

Mexico faces massive losses exceeding $2 billion due to the illicit tobacco market, worsened by tax hikes that fuel organized crime and undermine lawful businesses.

In Mexico City, alarming new reports reveal that the illicit tobacco trade could drain more than $2 billion from Mexico's treasury, even as the government pushes forward with higher taxes on legal tobacco products. This surge in taxation, rather than curbing illegal activity, appears to be accelerating it—raising serious concerns about economic sovereignty and law enforcement effectiveness. Why Are Increased Taxes Backfiring on Mexico’s Economy? Gastón Zambrano, President of the National Council of the Tobacco Industry, laid bare a troubling reality: since January 1st, the Special Tax on Production and Services (IEPS) hike has skyrocketed legal cigarette prices by nearly...

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