Mexico May See Black Market for Soda, Junk Food After Tax Raises Prices Patricia Rey Mallen - IBTimes
go to original January 14, 2014

A man drinks a soft beverage in Mexico. (Reuters)

As the controversial tax reform starts working its way into Mexican society, so do worries about the impact it will have in everyday lives. One of the most unpopular measures, the so-called “obesity tax” that targets sugary drinks and junk food as a way to fight the growing number of overweight people in the country, has already produced a consequence that supporters probably did not foresee.

Experts are concerned about a potential black market for junk food in order to avoid the tax. “It will be the same as with liquor and cigarettes,” said Iñaki Landavuro, president of the Asociación Nacional de Abarroteros Mayoristas (National Association of Wholesale Sellers, or ANAM). “Producers and distributors will start taking cash, instead of issuing receipts, to avoid the higher tax.”

Landavuro said that out of the 2,800 liquor producers in the country, only 800 pay taxes, an example that junk food and sugary drink companies might start to follow. He even said that companies might try to smuggle in candy and soft drinks from abroad, a practice followed by several tobacco distributors.

One of the issues with the tax is that it may affect sales. In 2013, the food and drink sector in Mexico grew 7 percent in volume, though not in revenue, with more sales at lower prices. Sales totaled 164 billion pesos ($12 billion), or 1.8 percent of the country’s GDP.

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