By Amy Guthrie
MEXICO CITY--Mexican soft-drink bottlers have committed to
boosting their cane-sugar purchases by 50% next year, the head of
the bottlers' association said Thursday, as the Mexican sugar
industry struggles with low international prices and faces a
domestic proposal to place a punitive tax on sweet beverages.
Mexico is the world's fifth-biggest sugar producer and also one
of the top consumers of soda per capita. Mexican President Enrique
Pena Nieto's government proposed a special tax on sugary beverages
this week in an effort to reduce consumption amid high levels of
obesity and Type 2 diabetes.
Emilio Herrera, who represents bottlers of Coca-Cola Co. (KO)
and PepsiCo Inc. (PEP) products, as well as other brands, said the
aim is to boost sugar as a percentage of the industry's sweetener
mix to 70% over time. He said it was difficult to say how much
sugar represents currently, given the broad mix of products the
beverage firms produce. For instance, some drinks are sweetened
entirely with high fructose corn syrup, while others use a
combination of sweeteners.
Carlos Blackaller, president of the national sugar-cane growers
union, estimated that sugar might represent around half the
sweeteners currently being sold to Mexican beverage makers. Mexican
beverage companies buy about 15% of the country's domestic sugar
production, he said, while around 40% goes to export markets where
depressed prices make it difficult to break even.
The sugar and beverage industries are lobbying Congress to
strike the beverage tax when they vote on Mr. Pena Nieto's broad
tax reform. The vote is expected by mid-November.
The proposal suggests a tax of one Mexican peso (eight U.S.
cents) per liter on sugar-sweetened drinks, which Mr. Herrera
calculates would make the drinks 15% to 20% more expensive. Public
health advocates who support a beverage tax say the measure doesn't
go far enough, suggesting that two Mexican pesos per liter would be
more effective in reducing consumption.
Mr. Blackaller argued that if the tax achieves its intended goal
of curbing sugar intake, the resulting job losses would only
aggravate social discontent at a time when striking teachers and
other angry protestors are blocking major thoroughfares in the
Mexican capital almost daily.
The Mexican sugar industry, which employs roughly 450,000 people
in mostly rural areas, is attempting to combat the tax measure via
dialogue with elected officials, rather than joining the street
protests.
Convenience-store operators are also up in arms, saying that
flavored beverages account for 30% of their sales. Cuauhtemoc
Rivera, who represents thousands of mom-and-pop corner stores as
president of the National Alliance of Small Retailers, said the
government was playing with fire by adopting a "trendy" cause that
could have widespread economic consequences.
If the tax is approved, Mexico would join countries such as
France in placing fiscal disincentives on sweet drinks in the name
of public health. Seven of 10 adults in Mexico are either
overweight or obese, while an estimated 15% of people over age 20
have adult-onset diabetes. The government cited mounting public
health expenses as a factor in proposing the beverage tax.
"Today they're going to put a tax on soft drinks, tomorrow it's
going to be tacos. This government is treating us like children who
don't know what's best for them," Mr. Rivera said.
The sugar content of carbonated soda has received plenty of
attention in Mexico recently, following a public awareness campaign
funded in part by Bloomberg Philanthropies, the umbrella
organization for New York Mayor Michael Bloomberg's charitable
activities.
Mr. Bloomberg, whose own campaign against sweet soft drinks has
failed in New York City, thanked Mr. Pena Nieto via a message from
his Twitter account Tuesday for "taking action on the obesity
epidemic" via the tax proposal. Mr. Pena Nieto in turn thanked Mr.
Bloomberg for recognizing Mexico's reform efforts in his own
tweet.
Write to Amy Guthrie at amy.guthrie@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires