Mexico’s Chamber of Deputies OKs junk food tax

MEXICO CITY — It may soon cost more to get fat in Mexico.

New taxes on high-calorie foods and sugary drinks were approved by Mexico’s lower house of Congress in a marathon 18-hour session that ended Friday, and are likely to become law. They are part of a broader package of taxes and other fiscal changes proposed by President Enrique Peña Nieto aimed at generating nearly $20 billion for the national treasury.

Mexico has one of the world’s highest rates of obesity, recently surpassing the United States, and health experts applauded higher prices for chips, candy and other chatarra, or junk food. However, the idea is being panned by many in the business community. Opponents liken the effort to the crusade by New York City Mayor Michael R. Bloomberg to tax or limit serving sizes for soft drinks, which also met stiff resistance.

“It will hurt,� said Eusebia Blas Luna, 50, who has been selling candy bars and sodas chilled by blocks of ice out of a tiny stand on Mexico City street corners for 20 years.

“Sales will fall, people will stop buying. It hurts them too,� she said. “They say this stuff isn’t good for you, but everyone gets a craving.�

Across the street at the Oxxo, the ubiquitous 7-Eleven-style convenience store chain, construction workers in orange hardhats were emerging at lunchtime with 2-liter bottles of Fanta Orange and bags of Bimbo cupcakes.

The taxes are “a cruel way to take away the little pleasure we can give our kids,� said Juan Torres, 55, who makes a living watching parked cars for a few pesos. “How do you tell your children you are so poor you cannot give them a little soft drink?�

The legislation taxes high-calorie foods, defined as those providing 275 calories or more per 100 grams, at 5% of the ticketed price and chewing gum at 16%. Soft drinks would go up in price about 8 cents per liter.

A generation ago, the country’s greater problem was malnutrition, and while such deficiencies certainly continue to exist, a larger middle class had adopted some of the more lamentable consumption habits of the country to the north, puffing out waistlines and padding hips.

The upside of making junk food and high-sugar drinks more expensive — and reducing their consumption — is the obvious health benefit. According to the United Nations’ Food and Agriculture Organization, 32.8% of Mexican adults are obese, and obesity-related diabetes is now the leading cause of death. Though some countries such as Samoa and Nauru have a greater percentage of obese adults, Mexico’s is the highest among large countries. In the United States, 31.8% of adults are obese, the FAO says.

“The eyes of the world are focused on Mexico,� the World Health Organization said, calling for passage of the taxes in one of the many full-page newspaper ads published this week to focus attention on the issue. Warning that Mexico was dealing with an “epidemic of obesity and overweight,� the WHO urged that the taxes be even higher.

But there is a downside. The items likely to be subject to new taxes are those that the poorest consume, and they will pay disproportionately.

The business community also says that mom-and-pop stores, like that of Blas Luna, will be hurt the most.

“The little stores rely on soft drink sales to keep their doors open,� said Cuauhtemoc Rivera, spokesman for the Alliance for the Protection of Jobs.

“Reject the Bloomberg tax,� another full-page ad screamed this week, alluding to the New York mayor’s campaign. “Say no to a tax promoted from abroad, that will not resolve the obesity problem and affects those who have the least.�

In a long, contentious session, Mexico’s congressional Chamber of Deputies overwhelmingly approved the tax package on votes from Peña Nieto’s Institutional Revolutionary Party and leftist factions that were grateful that the government’s original plan to place a value-added tax on food and medicines was dropped. The right-wing National Action Party, which is particularly attuned to the concerns of big business, voted against the measure.

A similar vote breakdown is expected when the package goes to the Senate, making it likely the legislation will be enacted.

Mexico’s obesity problem has grown with the expansion of easy-access processed foods. Convenience stores dot the street corners. Oxxo this year reported opening its 10,000th store in Mexico.

The overall fiscal-reform package has been widely criticized for the burden it places on the middle class while treading gingerly on the wealthiest, for whom the taxation rate was raised only slightly. Mexico has the lowest tax-collection rate of the developed world.

The package just approved also imposes a 16% tax on food for pets, which animal-rights groups warned will provoke many owners to abandon their dogs and cats, and a 16% value-added tax on most purchases in border states.

Lawmakers excised a couple of elements from Peña Nieto’s original proposal, including taxes on private-school tuition. Finance Minister Luis Videgaray complained that failure to pass the president’s proposal intact will create a $4.3-billion shortfall.

Most of the organized opposition to the junk food and soda taxes has come from a large coalition of business groups that argue that reduced sales will eventually lead to lost jobs, not to mention diminished profits.

Critics also say the fiscal package does little to address the vast “informal� economy and may in fact push more Mexicans into that precarious form of work.

At the Oxxo store, a clerk who identified herself only as Aracely because her bosses would get angry if they knew she had spoken to a reporter, said soft drinks and junk food were the biggest sellers, even though the refrigerated section offers a fruit bowl.

“It’s like with cigarettes,� she said. “You can raise and raise the price. People still buy them.�

[email protected]