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With few exceptions, Latin American governments and their trading partners are locked in a collective state of denial over a dirty secret. A complex array of illegal trade arrangements, untaxed transactions, and patent violating industries combine to form a substantial black market. This underground activity represents anywhere from 15% to 50% of GDP, depending on the country involved.

Private industry is frustrated by the apparent paralysis of many Latin American governments in cracking down on black markets. Local manufacturers are not protected against competition from foreign products that escape import tariffs and value-added taxes. The VAT alone reaches as high as 20% in some markets. Local retailers, paying top dollar for premium real estate, find themselves losing business to street vendors whose only fixed costs are relatively minor payoffs to corrupt government officials.