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Analysis

Impact of Mexican Tax on Sugary Drinks so Far

Fri, 09/09/2016 - 17:16

Obesity in Mexico is now considered to be an epidemic, overtaking alcoholism, hypertension and smoking as the number one causative factor in serious illnesses such as diabetes, cardiovascular disease, and cancer. It is a problem that the Government is trying to address with a number of measures, one of which is a taxation on sugary drinks. Implemented in January 2014, this tax places a one peso per liter surcharge on non-dairy and non-alcoholic beverages containing added sugar.

A survey conducted by the National Institute of Statistics and Geography (INEGI) found that in 2011, 70 out of every 100,000 Mexicans died from diabetes. Moreover, nine out of every 100 people without insurance tested positive for diabetes. With increasing pressure on healthcare providers and Seguro Popular, the government decided to address the issue with a taxation on soft and high-sugar drinks of roughly 10%.

Since the tax was implemented, studies have found that it has started to have a significant impact on the levels of consumption of carbonated drinks. Preliminary results from a study carried out by the Carolina Population Center and the National Public Health Institute (INSP) have estimated an average 6% decline in the purchase of taxed products. The statistics were more compelling among lower-income households, with a decline of up to 17% by December 2014, just 12 months after the legislation came into force. From the preliminary results in Mexico, it is clear that financial factors have a direct correlation with the consumption of fizzy drinks.

Revenue from the tax, estimated at US$1.3 billion in 2014, could be spent on obesity prevention programs and schemes to make potable water more accessible. Some experts compare this initiative to the tobacco taxation implemented several years ago, which was used as a source of funding for health programs, subsequently becoming widely criticized for that reason. On the other hand, many campaigners believe that the government reforms did not go far enough, and are calling for the level of taxation to be raised to 20%, in line with global public health recommendations. Many critics also believe that the tax is a simplistic way to tackle a more manifold issue.

For example, the National Addiction Center in New Zealand said that some soft drinks should be added to an international list of addictive substances, as people are increasingly developing compulsive behavior related to palatable, high-sugar foods and drinks. In fact, it argues that the behavioral pattern of a regular consumer of fizzy drinks closely resembles that of alcohol or drug addicts. Due to this, a tax on the drinks alone would not be enough to combat the implications of highly addictive behavior. Just as with drug addiction, the consumer cannot simply stop drinking fizzy drinks, even in spite of financial limitations.

In much the same way, soda and soft drinks are increasingly being marketed at children and adolescents. As a result, the habit of buying the same product is being ingrained into Mexicans. As early as 1973, one study by the American Marketing Association stressed that brand loyalty is measured against certain factors, such as repeat purchasing behavior and a degree of commitment. It is easy to see why marketing a product toward children establishes the foundations for long-term brand loyalty. This is not a uniquely Mexican problem, but with such high levels of chronic illness caused by unhealthy diet in the country, branding and marketing is something that could be addressed by the government.

Moreover, sugary drinks are not the only problem with Mexican diets. In terms of food, typical Mexican dishes tend to be deep fried, and filled with meat and cheese. With traditional food such as tacos, quesadillas, and tortas often consumed daily, it is not difficult to establish a link between obesity levels and diet, regardless of soft drink consumption. In addition, since fast food and packaged products were introduced in 1985, Mexican men have gained an average of 6.8kg and women have gained approximately 8.6kg. PepsiCo also found that Mexico’s per capita consumption of sugary snacks is more than that of Brazil, Russia, China, and India combined.

As with any public health issue, there is still a long way to go for the Mexican government. Many authorities believe that it is necessary to effect a change in attitudes among the Mexican public, which requires education. Rather than issuing orders and embargoes telling consumers not to buy certain products, the government could be focusing on explaining the reasons why. Additionally, starting at a grassroots level, in schools and within the community could create more of a long-term impact.

Marketing standards are also a significant issue to be addressed, but understandably the fear of backlash from large businesses may create a sense of caution within the government. It is clear that the issue is at a crossroads: supporting the economy with income from large corporations and alleviating the burden on healthcare caused by the problematic consumption of sugar in Mexico.