For people around the world who believe that taxing sugared beverages is a good public health policy, the country of Mexico passing such a tax was a stunning victory. There was a significant need in Mexico to be sure, given high rates of obesity, especially in children, and very high consumption of sugar-sweetened beverages. But there was also a powerful beverage industry fighting the taxes. A fascinating story unfolded as the tax was being considered with a number of courageous and creative individuals at the center. One key figure is today's guest, Dr. Juan Rivera.
About Juan Rivera
Dr. Juan Rivera is a leading public health official. He is the general director of the National Institute of Public Health in Mexico and is a professor of nutrition at the Mexican School of Public Health. His research focuses on the epidemiology of malnutrition in all its forms, including obesity, prevention and the design and evaluation of policies.
The National Institute of Public Health was instrumental, I know, in the design approval and evaluation of the sugar-sweetened beverage tax in your country. Can you talk about the evidence that you and your team generated around the tax and how the evidence got used?
Well, thank you very much, Kelly. Yes, the National Public Health Institute had been working in the area of obesity for many years before the tax was implemented. So we conduct the national nutrition surveys in Mexico, and we were able to show the very high burden of chronic diseases in Mexico, and in particular the very high prevalence of obesity and diabetes. So this was a very important piece that led to the approval of the tax eventually. The other piece of evidence that was very important was the very high consumption in Mexico of sugar-sweetened beverages. We have been conducting (within the national nutrition surveys) dietary surveys, and we have known that in Mexico, the consumption of sugar-sweetened beverages is probably one of the highest in the world. The other piece of information was that we have reviewed studies on the effects of sugar-sweetened drinks on health and we publish that information.
We made that available to NGOs, to government officials, and to the Congress. Then the other thing that we did was that we published a book about the different interventions that could reduce the prevalence of obesity in Mexico. So we came up with a package of interventions with the tool kit of obesity prevention. And one of the considerations was the use of taxes. So for the first time in Mexico, we started talking about the use of taxes. And one of the recommendations in that book was to study and estimate the price elasticity of demand for sugar-sweetened beverages and the gross price elasticity to identify which were the substitutes for sugar-sweetened beverages. And we also made available that information that was very, very important for obesity prevention. Particularly the fact that the price is elastic so that if you increase the price through taxes, you will have every direction in the intake of sugar-sweetened beverages. And the cross-price elasticity showed that most of the substitutes where water and other healthy drinks.
So the other thing that we also did was to estimate revenue for different scenarios of taxes. And the scenarios that we managed were 10%, 20%, 30% of tax. So all of that information was made available to NGOs and also to the Congress and to lobbying organizations that were working with the Congress. So, that was the basic information that was taken by the NGOs and the lobbying organizations. So the advocacy organizations raise awareness about the public health implications of sugar-sweetened beverages. At the same time, lobbying organizations convince members of the Congress to champion the tax. And finally we approached the Ministry of Finances, and we show them that you would get very high revenue with the tax, and at the same time, you would get some important health gains through the reduction of sugar-sweetened beverages. So that was basically the information that we generated, and that was used by these different actors so that the tax was approved in 2013.
So, Juan, you and your colleagues put together an impressive portfolio of scientific studies supporting the reduction in sugar-sweetened beverages. So why choose attacks as the main way to uh, to go down the road as opposed to say, educating people to consume less of the beverages?
Well, first of all in the book that I mentioned before, That put together a set of interventions for the prevention of obesity, we came up with a very important statement. That statement was that if you have an environment that is obesogenic such an environment that that really makes it difficult for people to adopt healthy behaviors and in this case a healthy diet because you lack water in the schools; because you have promotions and advertisements in every place about sugar-sweetened beverages and junk food; and because you have prices that favor a sugar-sweetened beverages over other healthy drinks and so on. If you have such an adverse environment, then education is really not very useful. So what we agreed, the team of people who work in this book is that we really needed to change the environment, to change the school environment, the community environment, to make the healthy options, and in this case, healthy diet and also physical activities that could be easily adopted.
And of course there is a role for education, but that role for education is once you have a healthy environment. So what we then looked at was that foods or beverages that were very highly consumed. In this case, sugar-sweetened drinks. And we decided that the tax was a good idea, first of all, because it compensates for some of the negative externalities related to the purchase and consumption of sugar-sweetened beverages. But also because the price was elastic meant that people would reduce the intake of these beverages. What we have in terms of evidence around the world is that education per se is very ineffective in terms of changing behaviors as opposed to changes in the environment: such as increasing prices.
Juan, the big soda industry is very powerful in Mexico. And given that Mexico was one of the first countries to consider passing such a tax, the industry went all out to fight it. What are some of the things that the industry did and how did the tax prevail despite the industry's opposition?
Well, you know, this an amazing story, Kelly, because let me tell you the truth. At many points during the process, I thought that we would not be able to pass the tax. The industry is very powerful. They use all their power against the idea of the tax. They lobbied in the Congress, they lobbied at very high levels in the executive branch of government, including the office of the president. And despite that, I think that the elements that made the tax a success were the following: first of all academia, particularly the National Public Health Institute that generated the evidence had meetings with the Ministry of finances. And this evidence was also passed to advocacy organizations that raised the awareness among the public in terms of the negative effects of sugar-sweetened beverage intake in Mexico, and lobbying organizations that convinced members of the Congress.
Then we had members of the Congress that really championed the idea. They were part of the opposition. And finally, once that the public was demanding this policy it was amazing how the advocacy organizations were able to convince people that the tax was a good idea. Nobody likes to pay taxes, but particularly when this advocacy organization, and let me tell you the name of that organization because I think they made a very important contribution is El Poder de Consumidor. They showed that if some of the revenues of the taxes were used to have water safe water in every school, water fountains in every school, then the opposition that generated at the beginning, the idea of paying a tax completely shifted to support on the part of the population. So we have support from the population, we have members of the Congress, particularly from the opposition that were for the tax. And finally we had the Ministry of finances that were also in favor of the tax, and finally the executive branch of Congress.
The first proposal was a tax that amounted to about 20% of the value, an excise tax of 20%. And the executive branch of the Congress intervened. They were the majority, and they compromised with a 10% tax. So I think that the industry was not prepared. They thought that they would convince the government that they were convinced, you know, both the federal government and also the Congress. And the fact that there were these organizations along with academia was something that they were never expecting. So the relationship between academia, NGOs and you know, part of the government that was supporting the tax made this possible.
Thank you, Juan, for mentioning the consumer organization involved in this. We have recorded a podcast with the director of that organization, Alejandro Calvillo, and he had some very interesting things to say. So I appreciate the fact that you worked so closely together. So let me ask about the effect of the tax. Can you summarize what the effects of the tax had been thus far?
Yeah, so we have been looking at the effect of the tax on different areas. First of all, we have looked at the impact on purchases. We have used a data set of consumers, a commercial data set, and we were able to show that after two years of implementation of the tax, 2014 and 2015, there was an average reduction in the purchases of sugar-sweetened beverages of 7.6%. So a tax that is close to 10%, a little bit less than 10%, had an effect on a reduction on purchases of 7.6% which amounts to about 5.1 liters per capita per year. And the other impact that we showed was that there was an average increase in the purchase of untaxed beverages, particularly water of 2.1%, in the same period of 2014-2015 which amounts to about 6.5 liters per capita per year. The other very important piece of evidence that we were able to obtain is that the reduction in purchases of taxed beverages was much higher in the lower socioeconomic tertile.
So, just to give you an example, in 2015 the reduction in the lower tertile was 14% as compared to the high tertile was 6%. So low socioeconomic status people benefited more from the tax. The other thing that we did was also to use sales, and we have very similar results. Sales showed that there was a reduction in sales of close to 7.5 percent. The other thing that we did was to look at changes in employment associated with the taxes. So we used monthly and quarterly data on national unemployment and by sector. And we found no reductions in employment in the manufacturing sector for beverages and no changes in employment in commercial stores selling beverages. And there was no increase in national unemployment rate associated with the taxes.
So industry claims that the tax is not working, that there are no effects on health, that it is regressive, that jobs are lost. And we have shown, first of all, that there has been an effect. Of course, we do not expect to have a reduction in obesity prevalence with a single intervention in a short period of time. So they are misleading the public opinion saying, well, you have not changed the body composition. Well, the tax was designed to reduce the purchase of sugar-sweetened beverages or the consumption of sugar-sweetened beverages, and it has demonstrated that it has done that job. Now if you really want to reduce more the purchases of sugar-sweetened drinks, then we should increase the tax. The tax is very small, only 10% and what we would really like is to take it either to 20 or 30% to have a more measurable effect. But the other important message is that we need a package of interventions. Any single intervention is not going to be able to solve. The problem is really the addition of many interventions--a package of obesity preventions that will really solve the problem.
Those are very impressive results that I know that the future of the tax will likely be affected by all the data that you and your colleagues are collecting. So congratulations on that. Let me ask one final question. How has the revenue to being used as far?
Well, part of the revenue but a very, very, very small amount has been used to improve water availability in schools. It has been used to construct some water fountains in schools, but unfortunately, it has been a very, very small amount. So something that the NGOs and the academic organizations and also some members of the Congress are trying to do is that we really need to ensure that the taxes, or at least part of the taxes, are used for obesity prevention. I think that that's one of the in Mexico that has not worked very well and currently, we are working with the Congress to see if we can increase the tax, but also to see if we can have some mechanism so that part of the taxes can be used for obesity prevention.
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