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Mexico’s junk-food fight gets messy

New president seeks to lift taxes

Gugar Soda’s factory in Oaxaca, Mexico, produces several types of drinks, including these pineapple sodas.Joshua Partlow/Washington Post

OAXACA, Mexico — Sweet tangerine sodas and strawberry kiddie drinks have been good for the Guzman family.

Over 60 years and three generations, their Gugar soda company has offered them hard-won prosperity in one of the poorest states in Mexico. It has allowed the youngest to study at the University of California at Berkeley and vacation in Las Vegas, and enshrined the eldest in a bronze bust with a nameplate that reads: ''Creator of entrepreneurs.''

But for Mexico, the vast appetite for sodas, chips, snacks, sweets — all manner of what they call here ''comida chatarra,'' or junk food — has helped inflate an overweight nation to obesity levels rivaled only by their American neighbors .

These two forces have now collided in a sumo-style conflict that is testing the power of Enrique Pena Nieto, Mexico's svelte new president. With his proposed tax increases on sugary drinks and snacks, Pena Nieto has angered an industry led by junk-food barons with global reach and political muscle.

Four of Mexico's 15 biggest public companies, as ranked by Forbes — including number two, Femsa, which makes and distributes Coca-Cola and owns the ubiquitous Oxxo convenience stores that stock it — sell the drinks and snacks that could be made more expensive by the taxes.

America's largest baking company is actually now Mexican: Grupo Bimbo, the Mexican food empire, owns well-known brands in the United States, such as Sara Lee, Entenmann's, Boboli, and Thomas' English Muffins, and has about 25,000 employees north of the border. Mexico has the highest per capita soda consumption in the world, and among the highest rates of diabetes, according to academic studies and industry consultants.

''Mexico is the world champion of consuming sugary beverages,'' said Juan Rivera Dommarco, head of the government's Center of Investigation in Nutrition and Health, which supports the tax increase. More than two-thirds of Mexican adults are overweight, he said.

The lower house of Mexico's National Congress passed the president's tax increase this month, ratcheting up the pressure for junk-food companies. The Senate is expected to vote in coming days.

The junk-food taxes — 1 peso per liter, or the equivalent of 8 cents, on sugary drinks, and 5 percent on high-calorie snacks — are part of a larger fiscal reform package by Pena Nieto's government intended to boost revenue.

The portion related to soda taxes is intended to raise $950 million annually. But the larger mission ''is to try to change people's behavior,'' said Christopher Wilson, an associate at the Mexico Institute at the Woodrow Wilson Center in Washington. ''The goal should be to make Mexico a healthier country.''

On the president's side in this struggle is Michael Bloomberg, the billionaire who is mayor of New York. He has tried, and so far failed, to ban oversize sodas in his own city. Bloomberg Philanthropies has spent millions to lobby in favor of the Mexican soda tax and fund research organizations to study issues related to obesity.

Dueling full-page newspaper ads are now daily fare. Stirring up some nationalist fervor, the main soft-drink industry group in Mexico has been paying for red, white, and blue ads trumpeting ''No to the Bloomberg Tax!'' and saying the mayor is behind a campaign to ''demonize sugary drinks.''

''Senor Bloomberg has apparently found in Mexico more fertile terrain than in his own city,'' the group's director general, Emilio Herrera Arce, said in an interview. ''His millions could have been better spent.''

''The pressure is very great,'' said Alejandro Calvillo, director of the nonprofit group Power of the Consumer, which has received Bloomberg Philanthropies donations and has been pushing for a 2-peso-per-liter tax on soda.

''The soft-drink industry isn't only trying to stop this because of the impact on the market'' but to avoid international precedent, he said.