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Peru Pirates Peddle a Big Industry
LIMA, Peru (Reuters) - Scores of Peruvian shoppers stepping out of a popular market in a run-down area of Lima clutch bags of Britney Spears CDs, Adidas sweatshirts, Calvin Klein watches and videos of recent block-buster hits.

What's the secret in a country where the minimum monthly wage is $117 and 54 percent of Peru's 26 million people live on $1.25 a day or less?

It's all fake.

While the traffic of pirated goods -- illegally copied videos and software, clothes with false labels, sham toys -- is a worldwide phenomenon, dealers and shoppers in this poor Andean nation say the trade is booming as hard times make originals unaffordable and technology facilitates reproductions.

"Selling originals just doesn't work because of the (economic) situation. One CD costs 63 soles ($18) -- with that much you could feed a family for a week," said David, 17, whose tiny stand is packed with pirated CDs that go for about 10 soles ($3) apiece and music videos.

He won't reveal his last name though because he, like the hundreds of vendors up and down the aisles nearby, fears he will be identified by police, who occasionally raid markets and street vendors to confiscate illegal merchandise.

"It's a risk," David shrugs. But in a country where 50 percent of the workforce are unemployed or under employed, that's a risk he says is worth taking.

The demand for cheaper, pirated goods is even higher in Peru as consumers pare back on full-price luxuries amid a three-year economic downturn. Officials forecast near-zero economic growth for this year.


"The prices are super cheap, and here I can buy four to five times as much as I can in an (electronics) store," 23-year-old student Jose Carlos Miranda said as he browses pirated video games with friends.

Monica Diez, 29, paced the aisles of the vast market in search of the vendor who sold her faulty videos that she bought for her 3-year-old son. "I bought them because they were cheap but they didn't work," she said.

Authorities say piracy is a plague that robs the revenue-starved government of taxes, inhibits creativity, and often leaves consumer with a defective product.

The government of President Alejandro Toledo's government, which took office in July and has pledged to kick-start the ailing economy, has said the 2001 budget deficit could reach 2.3 percent of the gross domestic product.

International ratings agency Moody's said recently it would maintain a negative outlook for Peru as it worried about the government being able to get its hands on much-needed tax revenues. So piracy is all the more worrying.

"It might be convenient for people's pocketbooks but in the long term it's a problem stemming from ... poverty," said Ruben Ugarteche, head of the copyright office in the state anti-monopoly and intellectual property rights agency, INDECOPI.

While it's hard to estimate the effect of traffic in pirated goods in the economy, Ugarteche said the trade is rampant. In the United States, for example, some 40 percent of software is pirated. In Peru, that reaches 98 percent.


Many pirated goods -- sold in markets, on street corners, at stoplights -- are produced in Peru, but more are brought from abroad, adding to a contraband trade that customs officials say costs some $80 million in lost import duties a year.

"This is another channel for contraband -- they're intrinsically related," said Raul Saldias, who chairs an anti-contraband commission at the National Society of Industry.

Officials are trying to curb the business, but they admit a tight budget and the sheer volume of pirated merchandise being trafficked make it a tough fight.

Police make about three raids a week, said Col. Victor Mateo Tueros of the intellectual property rights special police task force, which was launched in February. But he said what his force could control was only the tip of the iceberg.

"We're trying, but this is everywhere," he said.

Ugarteche said the government periodically disposes of confiscated goods like CDs and videos by piling it up and running a steamroller over them or by building giant bonfires of seized CDs and videos.

"This needs to parallel the drug trafficking fight," he added. Peru is the world's No. 2 producer of coca leaf, the raw material for cocaine.

But treading the line between booming demand and promises of a government crackdown, some retail officials played down the thriving illegal trade.

Hermitano Cordova, an official with one of Lima's vast markets packed with fake goods, denied the market he helps supervise sells pirated merchandise.

"Some 99 percent of what we sell is original. To have pirated goods, that would be immoral," he said.

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