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 firstname.lastname@example.org
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(END) Dow Jones Newswires
September 12, 2013 16:39 ET (20:39 GMT)
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