Policy Update Uncategorized

Coca-Colonization in Mexico: The Soda Tax that Almost Wasn’t

by Ally Gallop, RD, CDE

A year ago, I praised the Mexican government’s seminal 10% soda and 8% junk food taxes, which took effect January 1, 2014. The result? Soda consumption dropped by 6% and bottled water consumption increased by 4%. Yet nearly two years later, relentless soda lobbyists tried to cut the tax in half. Did you hear about that?

As someone who lacked a policy background prior to attending Friedman, I relied on the media to inform me about important nutrition policy issues; I didn’t seek these out. Of course, once at Friedman my interest level soared, and I began following nutrition policy. However, I realized that what initially makes the cut for national media attention isn’t always followed up.

Thanks to a prompt from Marion Nestle’s “Food Politics” blog, I found the follow-up I valued: Does anyone ever wonder what happened to the Mexican soda and junk food taxes passed in 2013? Let’s run through Mexico’s story together from the very beginning.

A 6-step guide through soda taxes in Mexico:

#1. 2006: The alarm sounded in Mexico

The release of the Mexican National Survey of Health and Nutrition instilled panic in the government: Between 1999 and 2006, the average waist size of adult women increased by 4.3 inches, childhood obesity increased by 40% in those aged 5-11 years, soda intake nearly doubled in adolescents and tripled in adult women, and the prevalence of diabetes had doubled (diabetes is the country’s leading cause of mortality). Furthermore, the top three sources of calories in the Mexican diet all came from high-calorie drinks.

Alarmed, the financial arm of the Mexican government consulted the Center for Research in Nutrition and Health at Mexico’s National Institute of Public Health. The Center’s solution was to cut sugar-sweetened beverage (SSB) consumption via an excise tax.

#2. 2012: The assistance of Michael Bloomberg

After Michael Bloomberg’s rejected soda tax in New York City, he continued to look for similar opportunities elsewhere. Industry money for lobbying was a major reason for his setback in New York, so in 2012 his foundation, Bloomberg Philanthropies, invested $16.5 million over a three-year period to match the Mexican soda industry’s anti-tax efforts. This investment allowed Mexico to fight on an even playing field against industry.

#3. October 2013: Mexico introduced a soda and junk food tax

The implementation of the Mexican taxes resulted from a unique set of circumstances. The government was looking for a swift way to prevent the continuous rise in diabetes and obesity. They were also looking for a means to raise money federally—the tax was hoped to raise $1.5 million per year. President Peña Nieto was in favor, but many in his party, the PRI, were not. The intra-governmental disagreement stemmed from close ties to soda: the PRI had previously accepted industry money, diabetes centers were funded by soda, and the industry had infiltrated both the country’s health secretary and the National Council on Science and Technology. All spoke out against the tax in favor of educating the public and promoting physical activity.

In a rare move of assessing public support, the government polled its citizens: 70% were in favor of the tax if revenue was directed to investing in water fountains in public schools.

The tax passed. Taking effect on January 1, 2014, the taxes would result in a one-peso-per-liter (10% or $0.08) tax on SSBs and an 8% tax on junk food supplying more than 275 calories per 100 grams. The tax neglects bottled water, flavored milk, and diet sodas. However, a VAT tax of 15% remained on these items.

#4. May to September 2015: Mexico drank less: Research showed the tax had been effective

Research out of the Mexican National Institute of Public Health, the University of North Carolina, and Euromonitor showed that during 2014:

  • Sales of SSBs fell by 6% overall
  • Sales of bottled water increased by 4%
  • SSB consumption dropped from 163 to 136.6 liters per person per year, declined by 10% in the first three months of 2014 (compared to the same period in 2013), and across all socioeconomic groups
  • The tax disproportionately affected the poor with SSB reductions of 9%. Yet diabetes also disproportionately affects the poor, who are less likely to have insurance to cover the disease’s medical costs

Further, the tax resulted in $1.2 billion USD in government revenue with $900,000 USD authorized for the installation of water fountains in schools. There were also 1,700 job cuts from industry due to decreased sales.

#5. October 2015: The soda industry fought back

Unsurprisingly, these victories made the soda industry unhappy. News broke in early October that the Mexican government’s lower house passed an amendment to cut the 10% tax in half for SSBs providing less than 5 grams of sugar per 100 milliliter. The reduction was aimed at providing industry incentive to reformulate its products to contain less sugar. The PRI apparently negotiated with FEMSA (the world’s largest bottling company located in Mexico) to reduce the tax.

However, once the public became aware of this, government parties scrambled and denied that they were ever in favor of the amendment.

#6. November 2015: The government’s change of heart

Ultimately, the senate overturned the amendment. The original taxes remain.

Ally Gallop, RD, CDE is a second-year nutrition communication and behavior change student focusing in U.S. food and nutrition policy. She prefers to sip on Americanos.

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