Mexico announces fight against obesity by taxing sugary drinks and junk food.
MEXICO CITY, MEXICO (REUTERS) - Mexico's Congress on Thursday (October 31) approved a 1 peso-per-liter tax on sugary drinks and an 8 percent tax on junk food as part of a wider tax overhaul to curb rising obesity levels as well as lift Mexico's poor tax take.
Obesity rates among Mexicans are now higher than in the United States and they are the world's biggest soda drinkers, guzzling about 707 8-ounce (0.24 liter) servings, on average, per year, according to U.S. newsletter Beverage Digest. TheUnited States is the only other country in the same ballpark, clocking in at 701 servings.
The move is a triumph for Mexican President Enrique Pena Nieto, who will sign the measures into law.
"Sugary drinks will be taxed. By initiative of the congressmen, backed by the Senators, non-basic food with high calories will also be taxed. The purpose of both taxes will be to reduce the consumption of these products associated with the increase of obesity among Mexican," Pena Nieto said.
Pena Nieto called for a "change of culture" in Mexico encouraging Mexicans to exercise at least one hour everyday.
Drink and snack food companies are expected to pass on the tax to consumers, which could put further pressure on economic growth which has slowed this year inMexico, hurt by a drop in consumer spending.
Coca-Cola has said it could reduce its workforce by around 3 or 4 percent and cut back on distribution routes.
Coca-Cola controls more than three-quarters of Mexico's drinks market and stands to be hit the hardest by the soda tax, according to Beverage Digest.
"Not only the government has taken responsibility but in Mexico it has faced one of the mayor obstacles to develop these policies which are the great interests of the very large companies, processing food and drinks. The director of the Pan American Health Organization has said these very large companies have turned into the main obstacle. We have to recognise this government is facing those interests and it has faced them through the regulations it has approved."
Much smaller players in the market include PepsiCo and Dr Pepper Snapple Group.
Most soft-drink and food companies are expected to promote diet versions of their drinks as well as to offer more alternative drinks such as juices, vitamin waters or just smaller sizes, said analysts in the Credit Suisse report.