The roots of music piracy

Latin Trade, Dec, 1998 by Sergio R. Bustos

TO UNDERSTAND THE ROOTS of pirated recorded music throughout Latin America, you must first journey halfway around the world to Macau, a territory of Portugal located in eastern China, bordering the People's Republic of China and the China Sea.

Macau, home to about half a million people, is producing and exporting millions of fraudulent compact disks, say music industry executives. They say the merchandise is then transported by ship to the Panama Canal, via plane to Ciudad del Este in Paraguay, and then by truck into Brazil, one of the region's most lucrative recorded music markets.

"It's an international phenomenon," says Andre Midani, president of U.S-based Warner Music Latin America. "These illegal compact disks are being made outside the region in places like Hong Kong, Singapore and Macau." Earlier this year, 500,000 compact disks were seized by authorities at a Brazilian airport. Officials later traced the merchandise to a factory in Macau.

Music industry executives warn that piracy is threatening to destroy the region's music business. "It's a double whammy: The world's major record companies are reluctant to invest in these countries and these countries are losing export dollars that could be generated from the sale of music by local artists," says Jay Berman, chairman of the International Federation of the Phonographic Industry. "In short, piracy is the number one obstacle to developing a healthy music industry in Latin America and the Caribbean."

The extent of piracy in Latin America is remarkable. For example, Brazilians last year bought about 122 million compact disks--about 12%, or 15 million, were pirated copies--according to, the Latin American Federation of Phonographic Producers (FLAPF). Sales of pirated cassettes in Brazil is so rampant that FLAPF officials have written off the business because an estimated 99% of the 66 million cassettes sold last year were illegal.

"It won't be long before the compact disk market turns into the cassette market in Brazil," warns Warner's Midani.

FLAPF and music industry executives face a monumental task because pirating recorded music is extremely profitable. Manufacturing a compact disk costs as little as 30 U.S. cents in a place like Macau and is sold for US$5 on the streets of Mexico and Brazil. The price is often one-third the price of a legally produced compact disk.