Author: Alan Zhao
This article reflects the author’s personal views only.
Key Points
In this article, Alan Zhao conducts a policy scenario analysis based on recent geopolitical shifts and regulatory practices in South America, exploring a potential path toward “U.S.-referenced regulatory alignment” in the novel tobacco market. He offers the following observations and assessments:
- The practical pathway of U.S.-referenced regulatory alignment
Rather than arising from explicit policy declarations, this process is driven by enforcement systems, data interfaces, and algorithmic risk controls, through which U.S. regulatory outcomes are increasingly becoming de facto market-entry thresholds in South America.
- The invisible expansion of “algorithmic sovereignty”
As regulatory judgment shifts from legal texts toward system-based pre-screening, administrative discretion may be quietly redistributed through digital infrastructure.
- A paradigm shift in the role of PMTA
The FDA’s PMTA framework may transcend its original territorial scope, evolving into a “digital compliance signal” shaping the circulation order of novel tobacco products across the Western Hemisphere.
- A redefinition of competitive dimensions
Market competition may move away from scale or cost advantages toward compliance identity—namely, who can be recognized by regulatory systems as an acceptable market participant.
- A reconfiguration of industrial survival thresholds
This is not merely a projection of market growth, but a structural scenario analysis of how the boundaries of industrial survival may be redefined.
I. Introduction: The Butterfly Effect from Caracas
In early January 2026, the United States formally announced the launch of an operation codenamed “Absolute Resolve.” Shortly thereafter, Venezuelan President Nicolás Maduro was arrested and transferred to the United States, with Washington issuing multiple statements declaring its deep involvement in Venezuela’s transition and reconstruction.
According to media reports, the United States stated that it would participate in “managing” Venezuela during the transition period until a “safe and orderly transition” is achieved. U.S. officials subsequently clarified that this role does not involve direct administrative rule, but rather the setting of transition conditions and the use of policy and economic leverage to guide the formation of a new governance structure. At the same time, Washington has initiated coordination mechanisms covering political, security, energy, and infrastructure domains, emphasizing the objective of “re-establishing order.”
The signal conveyed by these statements is straightforward: U.S. power will participate in reshaping regional order through institutions and rules.
From a news perspective, this is a highly politicized event. From an industrial research perspective, however, its deeper significance lies in how it alters the context in which “rules are defined.” Historical experience suggests that when external powers intervene deeply in governance and reconstruction, the earliest changes tend not to appear in specific laws, but rather in administrative orientations and regulatory reference systems.
It is against this backdrop that I began re-examining a question that may appear technical, yet is closely connected to current realities:
As “order reconstruction” becomes a policy keyword, is South America’s novel tobacco market also approaching a moment of regulatory restructuring?
This article explores such a possibility. I summarize it using a discussion-oriented concept: “U.S.-Referenced Regulatory Alignment.”
Here, “U.S.-Referenced Regulatory Alignment” does not refer to the formal transplantation of legal systems, nor does it imply political coercion. Rather, it describes a more practical phenomenon in which, at the level of market access, evaluation, and enforcement, U.S. regulatory outcomes are increasingly treated as de facto reference standards.
The purpose of this article is not to deliver a conclusion, but to shift the discussion away from the news event itself and toward a more concrete question:
When rules begin to change, how does the industry feel it first?
II. The Structural Reality: A Young Population and Persistent Regulatory Tensions
From a demographic and consumption perspective, South America has long been regarded as one of the world’s most promising markets for novel tobacco products.
The region has a total population of approximately 440 million, characterized by a relatively young demographic profile, rising urbanization, and a high level of receptiveness to new consumer products. In theory, these conditions align closely with the demographic prerequisites for rapid development of novel tobacco categories.
The reality, however, is more complex.
Brazil, the largest single market in South America with a population exceeding 200 million, plays a decisive role in the region. Yet since 2009, Brazil has maintained strict restrictions on novel tobacco products, resulting in a long-standing condition often described as “comprehensive prohibition with limited enforcement.”
This tension between policy and market reality is not unique to Brazil, but is shared across multiple South American countries:
- On the one hand, public health authorities adopt a highly cautious stance toward novel tobacco products.
- On the other hand, illicit and informal markets continue to expand, and consumption behavior has not disappeared as a result.
From an industry perspective, this situation does not represent a stable equilibrium, but rather resembles a regulatory vacuum.
The core issue is not whether regulation is needed, but rather:
Who has the capacity—and through what mechanisms—to establish an enforceable order for this market?
III. From Regulatory Export to the Invisible Expansion of “Algorithmic Sovereignty”
Before discussing U.S.-Referenced Regulatory Alignment, it is necessary to clarify a frequently underestimated reality: this trend does not rely solely on the explicit transplantation of legal texts. Instead, it often begins at the level of regulatory tools, enforcement mechanisms, and technical infrastructure.
In pharmaceuticals and high-risk medical devices, many South American countries have already established mature systems of Regulatory Reliance. Ecuador’s National Agency for Regulation, Control and Sanitary Surveillance (Agencia Nacional de Regulación, Control y Vigilancia Sanitaria, ARCSA) and Colombia’s National Institute for Food and Drug Surveillance (Instituto Nacional de Vigilancia de Medicamentos y Alimentos, INVIMA) provide clear examples. For products already approved by mature regulatory authorities such as the U.S. FDA, these agencies often apply “homologation” or simplified review pathways, focusing on formal verification rather than full technical reassessment. According to existing data, such pathways can shorten approval timelines by approximately 60–70 percent. This is not a surrender of sovereignty, but an institutional choice driven by governance efficiency and risk control.
The more consequential shift, however, is occurring at the level of digital enforcement and regulatory infrastructure.
As cross-border trade supervision, customs risk management, and compliance screening increasingly rely on information systems and algorithmic models, regulatory judgment is moving from case-by-case discretion toward system-based pre-screening. In this process, the data sources and rule sets embedded in risk models effectively constitute a form of governing power.
In highly contested categories such as novel tobacco, if customs and enforcement systems increasingly reference compliance outcomes from mature regulatory frameworks—such as FDA certification databases—when conducting risk classification, red-list identification, or early-warning screening, then effective market-entry thresholds may shift even in the absence of formal legal changes.
This is the least visible, yet potentially most far-reaching, dimension of U.S.-Referenced Regulatory Alignment. It may not manifest as a policy declaration, but rather through which datasets are called by systems and which compliance labels are algorithmically prioritized.
In this sense, U.S.-Referenced Regulatory Alignment is evolving from a debatable form of policy convergence into a potential technical barrier. Sovereignty is not explicitly transferred, but judgment authority may be quietly redistributed through algorithms and infrastructure. I summarize this phenomenon as an issue worthy of attention: the invisible expansion of “algorithmic sovereignty.”
IV. If U.S.-Referenced Regulatory Alignment Takes Hold: A Scenario Analysis for the Novel Tobacco Industry
Based on the logic of regulatory reliance, it is reasonable to infer that the novel tobacco industry may face a similar path choice. Given the high cost of building a fully independent scientific evaluation system, combined with the heightened sensitivity of novel tobacco products in public health and illicit trade contexts, South American countries are highly likely to forgo “starting from scratch” and instead treat the U.S. FDA’s PMTA framework as a de facto reference point.
The discussion below does not describe established facts. Rather, it presents a scenario analysis grounded in current regulatory logic, enforcement tools, and shifting geopolitical conditions. The core assumption is as follows:
If South American novel tobacco regulation begins to systematically reference the U.S. regulatory pathway, the resulting industry changes will not be marginal adjustments, but a paradigm-level transformation.
Under this scenario, competition will no longer center primarily on scale expansion, but on the redistribution of compliance thresholds and market participation rights.
1 | Reframing the Role of PMTA
From a “Regional Market Access File” to a Potential “Hemispheric Compliance Credential”
In this scenario, PMTA and its associated scientific audit data packages would no longer be viewed solely as regulatory filings for the U.S. market.
The key factor is not whether the United States requires other jurisdictions to adopt PMTA, but a more practical mechanism: PMTA’s high transparency, traceability, and auditability make it the most readily deployable compliance reference within enforcement systems.
In high-pressure environments emphasizing risk prevention, cross-border governance, and the suppression of illicit trade, South American regulators and enforcement agencies seeking to rapidly distinguish “controllable products” from “high-risk goods” may repeatedly rely on the compliance architecture represented by PMTA, gradually turning it into a de facto benchmark.
Under this scenario, PMTA’s significance extends beyond product safety or market access. It may function as:
- A compliance label systematically recognizable in cross-border circulation;
- A technical credential that reduces uncertainty for firms under heightened scrutiny;
- Even a digital signal linking regulatory review, enforcement, and financial compliance systems.
This does not imply that PMTA will be formally written into South American legal texts. Rather, it may be used in practice as a “compliance credential,” exerting influence far beyond its original institutional design.
2 | Accelerated Expansion Under an Order Dividend
Observing How U.S. Tobacco Companies May Shape a “Pan-American Market”
Under the scenario of U.S.-Referenced Regulatory Alignment, U.S.-based novel tobacco players may gain more than incremental market share. Instead, they may acquire a form of “accelerated expansion potential” amplified by geopolitical security dynamics and institutional compatibility.
As U.S. influence transmits across the region, the pace and scale at which U.S.-affiliated firms integrate South American operations into their global strategies merit close attention.
This expansion is unlikely to be driven by a single factor. Rather, it reflects the combined effects of political influence, brand credibility, and regulatory standard leadership, gradually forming a set of implicit market-entry barriers across South America’s approximately 440 million consumers.
Identity-security effects under intensified enforcement
During periods of order reconstruction and enforcement escalation, eliminating grey trade and compressing illicit financial flows often becomes an administrative priority. In such environments, U.S.-based brands may possess an inherent “compliance legitimacy,” being more readily perceived as known and controllable market participants compared to competitors operating through opaque or informal channels. This perception can translate into objectively faster market entry.
Brand-driven amplification of trust
In markets long characterized by regulatory vacuums and informal distribution, brands with clear origins and transparent backgrounds naturally enjoy stronger channel appeal. In this scenario, U.S. tobacco companies and their novel tobacco brands are not merely selling products, but exporting a recognizable sense of order and stability. For local distributors seeking to minimize regulatory and operational risk, partnering with U.S.-compliant brands may represent a rational balance between commercial efficiency and administrative security.
Institutional interoperability as an expansion engine
The most durable expansion momentum may stem from institutional interoperability. What U.S. firms have accumulated is not simply individual product authorizations, but a comprehensive set of digital compliance assets closely aligned with U.S. administrative systems such as the FDA and CBP. As South American markets increasingly “reference” U.S. standards, these assets may integrate more smoothly into restructured digital customs systems, while their compliance practices are absorbed as industry operating norms—creating sustained pressure on later entrants.
Under this scenario, South America may gradually shift from a standalone expansion frontier into part of a broader regulatory space. As regulatory logic converges, the outline of a pan-American novel tobacco market begins to emerge. Within this window, U.S. firms may attempt a transition from exporting products to shaping market structures.
3 | Two Manufacturing Trajectories
Second-Stage Evolution of U.S. Manufacturing, or Nearshore Extension into South America?
If U.S.-Referenced Regulatory Alignment advances across South America, its impact on the novel tobacco industry will not necessarily manifest as mechanical manufacturing relocation. Instead, two parallel—and potentially competing—paths may emerge.
Path One: Scale-driven evolution of U.S. domestic manufacturing
Under this path, South America does not become a primary manufacturing hub, but rather an incremental demand base for U.S. production. As South America’s 440 million consumers increasingly operate under U.S.-referenced regulatory logic, U.S.-manufactured products gain access to a hemispheric service market extending beyond domestic demand.
This expansion enlarges the “market denominator” for investment in U.S. manufacturing, supporting further specialization and technological upgrading. Compliance data accumulation and process precision become more economically viable when amortized across a hemispheric market. In this scenario, supply-chain upgrading occurs within the United States, but is driven by regulatory integration across the Americas.
Path Two: Gradual Nearshoring and Geopolitically Aligned Manufacturing Deployment in South America
As administrative alignment between South America and the United States deepens, novel tobacco supply chains may extend incrementally into the region. Here, South America evolves from a pure consumption endpoint into a location for selected manufacturing, assembly, or testing functions.
The drivers are not simply labor costs, but:
- Risk reduction through shorter logistics chains and lower exposure to long-distance political and transport disruptions;
- Customs predictability through deployment in highly aligned zones—such as Mexico’s free trade areas or designated economic zones in Brazil—leveraging trade logic reflected in frameworks like USMCA Chapter 28.
Such arrangements are likely to favor compliance-oriented assembly models, in which core processes remain within mature systems while final assembly and regional warehousing extend southward, forming nearshore nodes anchored in South America.
Overall, U.S.-Referenced Regulatory Alignment does not inevitably lead to manufacturing relocation. It may reinforce the global competitiveness of U.S. domestic manufacturing while simultaneously enabling a regionalized supply network. Which path dominates will depend on the evolving balance between market scale, institutional credibility, and geopolitical relationships.
Ⅴ. Conclusion: Why the Discussion Itself May Matter More Than the Answer
The analysis above reflects interim observations by a researcher tracking regulatory and industrial evolution across multiple jurisdictions, rather than a definitive judgment.
I have not lived or worked in South America for extended periods, nor do I possess firsthand experience with the complexities of policy implementation at the local level. As such, these interpretations should remain open to scrutiny and challenge.
If the hypothesis of U.S.-Referenced Regulatory Alignment proves to be flawed, the most valuable counterarguments are likely to come from practitioners working within South American regulatory systems themselves, rather than from abstract macro-level positions.
Looking ahead, I hope to engage with professionals familiar with public health policy, regulatory institutions, and industry execution on the ground in South America, in order to further test, refine, or revise these views.
In this context, the discussion itself may ultimately prove more important than any conclusion.
Author Bio
Alan Zhao is the co-founder of 2Firsts. He focuses on global nicotine industry regulatory policy, commercial development, scientific research, and technological innovation.
Email: alan@2firsts.com
