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 Business News | December 2006 
Mexican Soda Lovers Spared Tax
 Reuters
| | Mexico needs new sources of income because the government is vulnerable to a drop in revenue from crude exports due to falling world prices and a key oil well beginning to dry up. |
A proposed tax on fizzy drinks has caused a stir in Mexico, which quaffs more Coca-Cola products per capita than any other nation and has adopted soda alongside tacos and chiles into the national diet.
The Senate on Wednesday rejected a 5 percent tax on all carbonated beverages, a controversial part of new President Felipe Calderon's 2007 budget plan. Opponents say it would have hurt the poor, many of whom prefer sodas because potable water is less available and sometimes more expensive.
Each Mexican gulps down an average of about 40 gallons (150 liters) of carbonated drinks a year, according to the country's producers. Year-round heat throughout much of the country helps to whet their thirst.
"Many people are so addicted that without Coke, they can't live," said street burger vendor Gonzalo Alvarez.
The Chamber of Deputies backed the soda bill this week but the Senate voted 73-55 against it. The measure will be returned to the lower house, where it is unlikely to survive given Wednesday's lopsided vote.
Mexico's soft drinks association says the poorest Mexicans spend as much on soda as they do on tortillas or beans and that the tax would hurt them disproportionately.
The country topped Coca-Cola's 2005 list of per capita consumption of company beverages with 533 servings.
But nutritionist Enrique Rios said a tax on fizzy drinks would force more Mexicans to turn to fresh fruit juice, abundant and inexpensive in a country like Mexico.
Producers counter that soft drinks are a necessity for Mexico's poor.
"There are people who drink soda starting in the morning as part of their diet. The calories they get from the drink and its sugar, although not many, keep them going," said Alfredo Paredes, spokesman for the low-cost Big Cola brand.
Mexico needs new sources of income because the government is vulnerable to a drop in revenue from crude exports due to falling world prices and a key oil well beginning to dry up.
"We have to work for fiscal reform so we aren't dependent on the price of petroleum, so that we have a broader base of contributors with less tax evasion," said Gustavo Madero, a conservative National Action Party senator and leader of the congressional finance committee.
The tax vote was an early indicator of whether Calderon, who took office on December 1, will be able to persuade Congress to pass energy and other economic reforms.
His predecessor Vicente Fox failed in his effort to put a tax on food and medicine due to opposition in Congress and from ordinary Mexicans. |
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