Soft drinks in Mexico
Fizzing with rage
A once-omnipotent industry fights what may be a losing battle
LA MANSION steakhouse inside Mexico's lower house of Congress has become the headquarters of a lobbying effort the likes of which congressmen say they have never seen before.
There is so much wining and dining that one lawmaker, proposing a bill on October 15th to regulate the lobbyists, claimed he was talking to a half-empty floor because his colleagues were too busy being schmoozed at La Mansion.
The lobbyists work mainly for soft-drinks companies such as Coca-Cola, PepsiCo and their respective Mexican bottlers Femsa and Cultiba.
Their focus is a proposal currently under debate in Congress to slap an excise tax of one peso on to the price of a litre of fizzy drinks.
Though the industry has faced down consumer activists in the past in Coca-Cola's biggest market by volume outside the United States, this initiative comes directly from President Enrique Pea Nieto.
The lobbyists may have blundered in their attempt to kill it.
The government's argument is simple.
Mexicans consume too many fizzy drinks.
The habit has helped make the country one of the most obese in the world, and obesity is a killer:
Mexico's mortality rates from diabetes are staggeringly high. The government proposed the sin tax to discourage soft-drinks consumption.
The industry's reaction has been apoplectic.
In full-page ads in national newspapers it has argued that the tax is regressive and satanises soft drinks, which it claims do not cause obesity.
With a hint of xenophobia, the lobbyists call it the Bloomberg tax, because New York's mayor, Michael Bloomberg, has also sought to tax fizzy drinks.
Bethany Gomez of Euromonitor International, a consultancy, says the industry is right to be worried.
More than half the fizzy drinks sold in Mexico are in bottles of two litres or more, which is where the extra pesos would be most noticeable.
A switch to smaller sizes would hit volumes.
What is more, the tax may set a precedent.
Coca-Cola seems to be worried that whatever happens here could spread to the rest of Latin America, says Javier Trevio, a ruling-party lawmaker.
The lobbyists have made some missteps, congressmen say.
They have created enemies in other industries by proposing that the tax be charged on sugar content, not just on soft drinks.
That angers companies like Nestle, which makes sugary snacks, as well as Mexico's politically connected sugar-cane producers.
They have also been too overt in their lobbying, in a political system that is used to more subtle forms of collusion between lawmakers and business.
One of Femsa's main lobbyists, a former ruling-party bigwig, is said to have had a blazing row with the current head of the party in the lower house, who resented being bossed around.
So the soft-drinks lobbyists' tactics may have backfired.
As The Economist went to press there was still no final agreement on the soft-drinks tax—but congressmen appeared ready to approve the one-peso levy—as well as extending another tax to junk food.