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Mexico’s experience suggests soda taxes can help reduce sugar consumption

REUTERS/Edgard Garrido
Recognizing that there was an urgent need to discourage people from drinking so much sugar, the Mexican government implemented an excise tax of 1 peso per liter on all non-alcoholic beverages with added sugar on Jan. 1, 2014.

Mexico’s 2014 tax on sugar-sweetened beverages led to an average 7.6 percent decrease in the purchase of those beverages in that country during the tax’s first two years, according to a study published Wednesday in the journal Health Affairs.

The drop in purchases was noteworthy in both years: “Purchases of taxed beverages decreased 5.5 percent in 2014 and 9.7 percent in 2015, yielding an average reduction of 7.6 percent over the study period,” the study’s report said.

Last year, the beverage industry contended that the tax had not reduced purchases in its second year — a claim the industry then used to argue that such taxes are ineffective at changing people’s behavior. 

The current study, which is based on store-purchase data for 6,645 Mexican households from January 2012 through December 2015, contradicts that claim. People’s purchasing patterns in Mexico did, apparently, change — and significantly.

“At the global level, findings on the sustained impact over two years of taxes on the beverages in Mexico may encourage other countries to use fiscal policies to reduce the consumption of unhealthy beverages along with other interventions to reduce the burden of chronic diseases,” the study’s authors conclude.

Addressing a major health problem

As background information in the study points out, Mexico has a significant obesity problem. An estimated 70 percent of adults and 30 percent of children in Mexico are either overweight or obese — percentages similar to those in the United States.

And, although the obesity epidemic — which is global and growing — has many causes, health experts believe sugar-sweetened beverages are a major contributing factor, especially in Mexico. Mexicans reportedly consume more carbonated drinks per person than any other country, and a study published last year noted that almost 10 percent of all the daily calories consumed by Mexicans comes from sugars added to beverages.

Recognizing that there was an urgent need to discourage people from drinking so much sugar, the Mexican government implemented an excise tax of 1 peso (about five U.S. cents) per liter on all non-alcoholic beverages with added sugar on Jan. 1, 2014.

It was quickly clear that beverage sellers fully passed on the tax to consumers in the form of higher prices. Indeed, no similar hike in prices occurred for untaxed beverages (diet sodas, unsweetened waters, juices and dairy-related drinks).

As the current study found, the tax appears to be having its desired effect. The purchase of sugar-laden drinks declined an average of 7.6 percent in Mexico during the tax’s first two years, with the reduction larger in 2015 (9.7 percent) than in 2014 (5.5 percent).  The decrease occurred at all socioeconomic levels, but was greatest among the poorest third of Mexican households.

Interestingly, during the same period, the sales of untaxed beverages in Mexico rose by 2.1 percent.

Limitations and implications

Of course, this study, like all studies, has its limitations. In particular, it is observational, which means its findings can’t prove that Mexican households cut back on their purchase of sugary drinks as a direct result of the new tax. Other factors — perhaps a greater awareness about the health dangers of added sugar — could have led Mexican consumers to take home fewer sugary drinks from the store.

But the study’s authors — from Mexico’s National Institute of Public Health and the University of North Carolina — believe that the tax is a more likely reason for the changed behavior.

And that may be good news for Mexicans — and Mexico.

“These reductions in consumption could have positive impacts on health outcomes and reductions in health care expenses in Mexico,” write the researchers.

“As our study showed,” they add, “decreases in purchases were greater among households at the low socioeconomic level than those at higher levels, which could lead to higher health care savings for the country as well as for individuals.”

FMI:  You can download and read the study in full at the Health Affairs website.

One more (bizarre) thing: A curious — and troubling — addendum to Mexico’s soda-tax story emerged earlier this month. The Citizen Lab at the University of Toronto’s Munk School of Global Affairs reported that an espionage operation using “government-exclusive” spyware had tried to hack into the e-mail accounts of Mexican scientists and health activists who had vocally supported the soda tax.

“The operation used spyware made by the NSO Group, an Israeli company that sells intrusion tools to remotely compromise mobile phones,” the report says. 

The Mexican government has acknowledged purchasing this spyware in the past, according to Citizen Lab. “This case suggests that NSO’s government-exclusive espionage tools may be being used by a government entity on behalf of commercial interests, and not for national security reasons or fighting crime,” they write.

You can read the Citizen Lab report on the organization’s website. Reporter Nancy Fink Huehnergarth has also written about this bizarre tale in an article published recently in Forbes.

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