With Its Soda Tax, Mexico Repeats The Mistakes Of Mayor Bloomberg:If Obesity Could be Outlawed, it Wouldn't be a Problem
By the middle of October, if everything stays on schedule, Mexico's legislators may well prove that they haven't learned a thing from policies that have been tried and failed, from Denmark to New York City.
Mexico's government is deciding whether to levy a 1-peso-per-liter tax on manufactured sugary drinks, purportedly to address Mexico's obesity epidemic. The tax would raise just over $900 million in annual revenue. But experience shows: the extra revenue won't go to reduce the obesity rate in Mexico — or anywhere else. And, even if it did, experience also shows that the extra revenues collected won't have the intended effects on consumer behavior – which is where the waist-line battle is won or lost.
Denmark provides a case in point. In 2011, it levied the world's first tax on saturated fats; just about a year later, it abolished the tax. In between, apart from enduring the administrative nightmare of enforcing it, Danes went shopping – in Germany, in Sweden – where rich foods weren't specially taxed, and otherwise found work-arounds to avoid the tax.
In the U.S., New York City Mayor Michael Bloomberg's infamous soda ban was headed in the same direction. To combat New Yorkers' rising obesity rates, Bloomberg tried to prohibit sales of 16-ounce soft drinks in the city's restaurants, movie theatres and street carts. But you could buy one (or as many as you'd like) at a grocery store. Or, for that matter, you could buy two 8-ounce soft drinks in restaurants, theatres or on the street – just not 16 ounce drinks. Exempted from the ban were 16-ounce fruit juices, milkshakes, and lattes, though each of these could easily contain more calories than a soft drink. These contradictions contributed to the court decision that shot down the ban – though the big mistake was in trying to regulate consumer choice by government fiat.
Mexico is poised to repeat Bloomberg's folly, even as its obesity rates surpass those of the United States. In urging a soda tax, Alejandro Calvillo, Director of the non-profit El Poder del Consumidor, argued, "If a tax of 20% (approx. 1.5 pesos for a can) would be applied to sodas consumed in Mexico to reduce consumption, only 10% of that amount could fund water fountains that could be installed in more than 120 thousand schools in the country." But the government's soda tax legislation doesn't provide any funds for water fountains, so what will ensure that they're ever installed? And just like the failed New York policy, the proposed tax is selective, allowing fruit juice, beer and milkshakes to escape the net. The new tax also wouldn't touch the home-made highly sugared waters, like Jamaica and horchata – often more sugary than commercial sodas — that are sold on street corners in Mexico.
Like any consumption tax, it would also hit hardest those least able to afford it. It would hit large families harder than single people. And it's irrelevant to fundamental problems: access to uncontaminated fresh produce and safe drinking water.
This last point highlights the tougher challenges of fighting obesity in Mexico's rural areas, where kids turn to bottled drinks for want of safe drinking water. At least the sodas don't carry infectious bacteria. Similarly, discouraging consumption of high-calorie processed foods will have limited impact in places where common street foods like Guajolota – a traditional breakfast of a deep-fried corn-and-lard tamal folded into a sandwich – are widely consumed.
A recent article in the American Journal of Agricultural Economics explains consumer behavior in the face of such taxes. Lead author Chen Zhen explained, "Consumers can simply substitute a taxed high calorie for an untaxed one. And as we know, reducing calories is just one of many ways to promote healthy eating and reducing nutrition-related chronic disease."
Looking at eating habits is, of course, only one side of the ledger. Controlling obesity requires more than cutting calories. It also requires burning more calories through exercise. But it's tough for kids to get the chance to do that in many parts of Mexico, with a dearth of safe, fenced outdoor play and exercise spaces at many schools limiting available play time.
So how to address the obesity challenge? In Mexico – as everywhere – what's needed is a holistic approach, since obesity has many causes. Parents and kids need advice and encouragement to pursue healthier eating, adopt healthy lifestyle and exercise habits, and acquire greater awareness of the calories and nutritional content of the food choices they make. Despite activists' claims that industry is the source of the obesity problem and therefore can never be part of the solution, food and beverage industries do have a constructive role to play. After all, the most effective solutions for tackling obesity come from the private sector.
For instance, a potential model in the United States is the Healthy Weight Commitment Foundation, an umbrella group of food and beverage companies that recently delivered on a commitment they made in 2010 to reduce 1.5 trillion calories sold in the marketplace. They have also partnered with Discovery Education to develop a free, online curriculum that teachers and parents can download to help them learn more about what it takes to live a more active healthy lifestyle and that curriculum has already been developed in Spanish.
This model stands in sharp contrast to Mayor Bloomberg's meddling, busy-body approach. As if he didn't have his hands full managing New York City, he's apparently found time to help prescribe what's best for Mexicans. His philanthropy has 'invested' $10 million over three years in NGOs like Mr. Calvillo's to promote his hobby-horse anti-obesity campaign – and nanny state agenda. The NGOs are happy to take Bloomberg's cash. But how will Mexicans feel about having a U.S. Mayor tell them what to eat and drink?
Reducing obesity in Mexico requires enormous work. As First Lady Michelle Obama often says, everyone has a role to play and we each need to play our part. If obesity could be outlawed, it wouldn't be a problem. But since it can't be, it's going to take hard work, including a broad private sector coalition – not just a political 'quick-fix' tax.
[Originally published on Forbes]