Director of the Center for Research in Nutrition and Health, National Institute of Public Health of Mexico
Senior Fellow for Global Health, Economics, and Development, Council on Foreign Relations
More than two-thirds of the U.S. adult population is obese or overweight; the rates of obesity have begun to rise even in low- and middle-income countries, especially among children. For years now, health advocates and the beverage industry have fought over whether soda taxes are an important measure for fighting the obesity crisis. In 2014, Mexico, which has a higher rate of adult obesity than the United States, became one of the first countries to implement a nationwide soda tax. Dr. Juan Rivera of the National Institutes of Public Health of Mexico joins CFR’s Thomas Bollyky to discuss the early results from the first year of that tax and its implications for the use of soda taxes in other countries and cities.
BOLLYKY: Great. Well, good afternoon. My name is Tom Bollyky. I'm a senior fellow here at the Council on Foreign Relations. You are at an event on the role of soda taxes in the fight against obesity -- a progress report from Mexico. If you think you're here for a lecture by Robert Gates, you are in the wrong place.
But I'm pleased to see a pretty full house here today. This event was advertised with all of six days' notice. So it is good to have such a good turnout. I'm not surprised.
So the issue we're here to talk about is obesity. In case you were wondering, it is not just you or me or a particularly bad holiday season. People worldwide are getting fatter. Nearly 30 percent of the global population, more than 2.1 billion people, are overweight or obese. If the current growth rate in the prevalence of obesity continues, half of the world's population will be overweight or obese by 2030.
The personal, societal, and economic costs of that trend, not surprisingly, are staggering. According to a 2014 McKinsey study, obesity is already responsible for approximately 5 percent of all global deaths and $2 trillion in economic losses, or 2.8 percent of global GDP.
One thing that can certainly be said for the obesity epidemic in the United States is we were an early adopter of this problem. In the United States, roughly two-thirds of the adult population is either obese or overweight.
The only country that exceeds the United States in its obesity problem is Mexico. In Mexico, the adult rate of obesity exceeds 35 percent, and nearly 70 percent of the adult population is obese or overweight.
In both Mexico and the United States, education and personal responsibility are critical elements of any successful program against obesity, but have proven insufficient on their own to stem this problem. Accordingly, the search has been on for cost-effective, scalable interventions that rely less on the conscious choices of individuals and more on the changes to societal norms and the environment that can spur healthy behaviors.
Among these interventions, the one that has gotten the most attention has been taxes on sugar-sweetened beverages -- soda in particular. It is also the most politically controversial. The food and beverage industry has generally fiercely opposed these taxes as unfairly targeting their industry, being regressive, and as lacking scientific evidence that these taxes alone would alter the behavior and preferences that are spurring the obesity problem.
In 2013, Mexicobecame the first large country, or one of first countries, to pass an excise tax on sugar-sweetened beverages. It has been in affect since January 1, 2014. And today we have, truly, the ideal speaker to come here and update us on the early results of that tax. Dr. Juan Rivera is the founding director of the Center for Research in Nutrition and Health. He's also a professor of nutrition at the School of Public Health of Mexico and is affiliated with Emory University. Dr. Rivera is also one of the coauthors -- and joined by his another of his coauthors today -- of an observational study published this month in the British Medical Journal on the progress that has been seen from that tax in Mexico.
Dr. Rivera will speak for ten to fifteen minutes, updating us on the obesity challenge in Mexico, the background to the tax and the early results they've seen in their work. After that, I'll take the moderator's prerogative to ask a few questions, and after that we'll turn it over to the audience. When we do, if you could put up your placard, I will call you in the order that I have seen you, and please state your name and affiliation.
Today's event is on the record and for attribution. Anything you do and say can and will be used against you. Please keep that in mind. We will, as with all council events, endeavor to end exactly on time.
And with that, let me turn it over to Dr. Rivera.
RIVERA: Thank you very much. Well, first of all, thank you, Tom, for inviting me. It's an honor to be here at CFR.
And I'm going to briefly speak about the context in -- in Mexico, then about the studies that led to the justification of the -- of the tax, how was the -- the approval process in the -- in the Congress and with the executive branch of the federal government, then talk about the recent publication of the evaluation in a -- in the British Medical Journal, and then talk a little bit about, you know, what is next.
And I would like to talk to introduce you to Arantxa Colchero, my colleague from -- also from the National Public Health Institute. She's the leading author of the British Medical Journal. I am a nutritional epidemiologist, she's an economist. So I thought that it would be a good idea for -- to have here Arantxa. SoMexico is a country that is experiencing a -- a nutritional transition. We -- up to date, it's a country with the double burden of undernutrition and overnutrition, and all the comorbidities.
So we still have a prevalence of stunting, for example, of about 14 percent in children under five. So it's about 1.5 million children under five who are stunted, 20 percent anemia in children.
But at the same time we have, as Tom said, 70 percent of overweight and obesity in adults. And in children, one of every three children inMexicoare either overweight or obese.
It is estimated that the -- the cost of obesity -- both the direct cost due to treatment of the conditions that -- that are caused by obesity, and the indirect costs due to loss of lives, or -- you know, deaths and absenteeism -- is in the order of eighty-five billion pesos, which is about five billion dollars per year, which is very important.
For example, one of our health systems, which is a -- a health system that applies to the general population, about half of the population inMexico, costs about that -- that amount.
So I mean, we -- we could -- with the cost of obesity, we could have a much better health system, if we were able to have some interventions that would reduce these costs.
As a result of this reality, I headed a -- a panel of experts from the Mexican National Academy of Medicine that came up with a recommendation to the government to develop a large, comprehensive, cross-sectoral intervention, with participation of multiple stakeholders -- government industry, also NGOs, academia -- including a package of interventions for the prevention of obesity.
So the interventions were both -- some of them aimed at changing the environment. So we are saying that, inMexico, we have an obesogenic environment. It's easier to find unhealthy choices. Some of them are cheaper than the healthy ones.
For example, 40 percent of schools inMexicodo not have potable water. So, to change that environment so that the healthy choices become the default, so it's easier for people to engage in the healthy choices -- so that's, you know, changing environment.
The other part of the policy recommendation was a -- a communication strategy to inform people about what is a healthy diet and also what -- what is the ideal physical activity, because Mexico is also a country with people doing very little physical activity. So it's both physical inactivity and inadequate diet.
So we came up with that recommendation, and we started by publishing the results of our national nutrition surveys, showing that our diet is unhealthy in general.
The first finding that was shocking to me was that, if you look at the basic food that people should eat -- cereals, legumes, fruits and vegetables, milk and -- and derivatives, and meat -- that amounts to 75 percent of the calories consumed by Mexicans.
The other 25 percent is composed of sugar-sweet beverages and what people call inMexico"junk food". So that one of every four calories are, I would say, almost empty calories.
So that really has to change, and part of the recommendations of the academy was reduce the intake of sugar-sweet beverages, junk food, increase the intake of fruit, vegetables, milk.
Increase intake of legumes, for example. Meat -- we are a country that -- we eat, you know, reasonable amounts of meat. We don't need to change that.
So the idea is that you really need to -- to improve the quality of the diet, and at the same time engage in physical activity through these sets of -- package of recommendations.
The package of recommendations include, for example, a communication strategy by the government, doing changes in the school environment so that children can engage in more physical activity, regulating the foods and beverages present in the schools, providing potable water in all the schools, a front-of-pack labeling that will help people make healthy choices, marketing regulations so that children are not exposed to marketing of products that can -- can be harmful to their health.
And, of course the tax. I mean, the tax is part of the package, but it's only one component. And I -- I want to reiterate that it's one component of the package.
So the government -- the current government implemented a strategy that has all of these components that I mentioned, including the tax. The tax is the only intervention that has been formally evaluated. The other ones, we are in the process of evaluating them.
So the first studies that we conducted were on cross-price elasticities of demand for sugar-sweet beverages. And the results of those studies -- the conclusion was that the demand is elastic.
If you increase 10 percent the price of sugar-sweet beverages, the consumption will be reduced by between 10 and 12 percent, depending on the data set we use. Arantxa was also the first author of those studies.
So that -- that was the first one, so the -- the -- the demand is elastic. The second thing was that the elasticity was -- was higher for the low-income population. Which is, you know, good news.
The third one was that revenue would be very high. We were -- were estimating about eighteen billion pesos, which, unfortunately, now we have -- our peso is so weak that it's one billion dollars. That's the revenue from the -- from the soda tax.
The recommendation was to use that revenue for obesity prevention, to use that revenue to provide water in schools, to engage in more education and so on. So the -- once we -- the other thing is that we conducted further dietary studies, and we found thatMexicois consuming very, very large amounts of sugar in general.
The WHO recommends not to consume more than 10 percent of the total energy in a day from added sugar.Mexico, on average, is consuming 12.5 percent. About 70 percent of Mexicans consume more that 10 percent. So it was obvious that one of the nutrition policies could be reduce the intake of sugar.
Now sugar-sweet beverages provide 70 percent of the total added sugar inMexico. That includes the -- the sugar-sweet beverages that are produced at home. For example, inMexico, we drink a little bit -- you know, diluted juice with sugar. So that's included.
But most of the sugar-sweet beverages consumed are manufactured by industry. So it's about one-third home consume, two-thirds industry manufactured. So that -- a lot of the sugar comes from sugar-sweet beverages.
So that's when the idea of taxing the -- the sugar-sweet beverages came. We are eating too much sugar, we have an obesity epidemic with a lot of chronic diseases around. Taxing sugar-sweet beverages would reduce the intake of sugar.
The other thing is that sugar-sweet beverages -- one of the characteristics is that they do not produce a response in appetite, so that you can -- for example, if you consume the same amount in a solid form, or in a liquid form, one hundred calories, the solid form will promote what is called dietary compensation, so you reduce your intake later on, but the liquid form doesn't.
So all these, along with the elasticity results, were used by the government to propose a tax. The proposal of the tax was made by the opposition parties in -- in the senate. The proposal was two pesos per liter which is about 20 percent.
The government -- The Ministry of Finances came with the proposal to reduce it to one peso per liter, which is 10 percent, and that's the proposal that was passed in 2013. So in 2014, the tax was implemented -- and also '15.
So we evaluated the tax using a -- a -- a commercial panel of consumers' data, in which the consumers are surveyed every two weeks so we have information of their purchases. It's about six thousand households in urban areas in Mexico. And we have data from 2012, '13 and '14. So what we did, really, was to compare intakes or purchases of sugar-sweet beverages before and after the tax.
Since there was already a downward trend -- small downward trend in the consumption of sugar-sweet beverages in Mexico, we had to adjust for that downward trend, and we did it through a statistical method using fixed effect models.
And what we did was to create a counterfactual so that we compared what would be the consumption in the absence of the tax versus the actual consumption. And we found a difference -- we say a reduction in the intake of 6 percent overall, in the overall population, that was up to 12 percent by the end of the year. So there was an increasing trend over time.
The effect was observed in all socioeconomic groups, but in the lower socioeconomic groups, the average was 9 percent, and -- and it went up to 17 percent by the end of year.
The amount of sugar-sweet beverages reduced was 4.2 liters per person per year, on the average. And we also saw an increase in the intake of the non-taxed beverages -- an increase of about 4 percent. Mainly bottled water, but also other beverages that do not have added sugar.
So, our conclusion is that the -- the tax is working in terms of reducing the intake. Now we are conducting some mathematical modeling to look at the potential effects of these reductions in the intake on obesity and on chronic diseases over time.
So you will not see an effect on obesity immediately -- I mean, one year is too little. But over time, we have already some preliminary analyses that show declines in overweight, obesity, and diabetes. And that will be published later on.
So I would like to reiterate that of all the -- of the package of policies thatMexicois implementing, this is the first one that has been evaluated. It is working.
But it will not work if it is only applied by itself. You really need a comprehensive strategy. You need also to -- all the other strategies to work: education, restrictions in -- in schools and public places, the provision of water, all of the other interventions that I mentioned.
This alone is going to have an affect on health, but the effect of health with a 10 percent tax may not be enough. The other way to increase the impact is to use the revenue for obesity prevention, and that's really our proposal. That's what we are pushing very much to the government -- to use the revenue in actions that may reduce obesity.
So thank you very much. I think it's on time.
BOLLYKY: I have a lot of questions. It's a fascinating topic. The first, I would ask just a point of clarification. You mentioned that it would be some time before you really saw the effect of the reductions in consumption of sugar- sweetened beverages, showing up in either reduced obesity or in reduced prevalence of chronic diseases. How long do you think that lag time will be?
RIVERA: Well, you know, according to the -- to the models, you start to see noticeable effects that can -- can affect prevalences after three or four years. If you make the maths with the amounts of calories that you reduce, and of course you -- if you reduce that calories, that means that people are substituting by -- with water and with other, you know, foods that are not high in calories.
You know something like one thousand nine hundred calories may reduce the average weight of -- for about two hundred forty grams, which is probably too little. Maybe you cannot notice it. But it's a population level. It's an average reduction.
And if you wait, you know, five, six, ten years, that may end up being two kilos in ten years, on average. That -- that could really move the prevalences of obesity.
You know, we have been increasing so fast that, even if we just be able to stop the growth of obesity, that for me would be successful. And of course we need later on to start a decline.
In terms of diabetes, of example, the estimates that -- in the mathematical models is that by 2030, we could avert four hundred thousand cases of diabetes, which is substantial.
I mean,Mexicohas a very high prevalence of diabetes -- about 4.5 -- 14.5 percent in adults. And of course four hundred thousand is not enough to solve the problem, I'm -- I'm sure, but it's working. It's one policy that is starting to -- to work. But we need other policies to work also.
BOLLYKY: Great. I had more questions about your study, but I'll leave that aside for the time being. I want to ask a couple of broader questions about the tax.
As you know, thirty U.S. cities have tried to implement taxes on sugar- sweetened beverages, and it's been controversial everywhere. Only one city has succeeded: Berkeley, California.
BOLLYKY: Denmark had a "fat tax", so to speak, and after a year, they had to withdraw it because it was generally politically unpopular.
One argument you hear about taxes on sugar-sweetened beverages is less about the debate whether they're effective, and more about whether they poison the policy environment around addressing obesity. Are sugar taxes so politically controversial that the other interventions for obesity that you've talked about – exercise promotion or better marketing behaviors from the companies -- become more difficult to accomplish because all the air in the room gets sucked up by the fight over sugar-sweetened beverages? Did you see that dynamic at all in Mexico?
RIVERA: Well, let me tell you that, inMexico, other interventions have been more poisonous. For example, when we were able to pass the regulations in schools, the -- the response from industry was such that the environment was very, very toxic -- and it was just regulating the presence of sugar-sweet beverages and junk food in schools. When we proposed, for example, a front-of-pack labeling that was a -- you know, pointing out which foods and beverages you should reduce, that also poisoned the environment.
I don't think that taxes are the only policy that poisons the environment. But I think that poisoning the environment is less harmful than twenty-four thousand people dying as a result -- direct result of the consumption of sugar-sweet beverages in Mexico. More than the organized crime. It is twenty-four thousand people, according to the Global Burden of Disease project, led by our friend from the University of Seattle.
RIVERA:Washington. It's -- it's really -- I mean it's something you should -- we should do something. And we are in the same boat -- industry and academia and everybody is in the same boat, and we should do something.
And I agree that taxes is not the only one -- the only alternative, but we should also include taxes, and other -- other -- policies that we have maybe have not imagined, because some -- you know, some people say you can tax some food, and then you can also provide subsidies for fruits and vegetables. So there may be other alternatives.
BOLLYKY: Great. One more question, and then I'll turn it over to the audience, so start thinking of your questions now.
As you mentioned, or you alluded to, there has already been a decline in the consumption of sodas in Mexico. There's been a similar decline in the U.S. Over the last eight years, particularly among U.S. children, soda consumption has declined 4 percent. That’s not a lot, but the decline seems to be accelerating.
Are we chasing a problem that is starting to solve itself? Are our resources to address obesity better spent elsewhere? With all the fights over sugar-sweetened beverages, are people starting to understand the message there and, if so, maybe we should focus more resources elsewhere?
RIVERA: Yes, there has been a decline inMexico-- not as large as in theU.S.We don't -- we have just data from 2012, 2013, 2014. But -- correct me if I am wrong, Arantxa -- but the decline is very tiny.
If we just rely on the -- on that -- on the pace of the decline, we would probably have to wait decades before we really see a decline in the intake of sugar-sweet beverages at the level that we'd consider appropriate. Even if -- just to reach the WHO goals, it would take a long time.
So I think that it's nice that there is a decline, because I think that that probably has to do with people starting to change their behaviors as a result of knowing that having -- you know, having -- drinking too much sugar-sweet beverages is not appropriate. But I think that we need to accelerate that pace of that decline.
BOLLYKY: Great. Let me turn you over to take a few questions. Again flip up your placard, I will call you in the order that I see you in. I see Guy first.
QUESTION: (inaudible) on other foods if you don't mind just adding that.
RIVERA: ... yes.
QUESTION: Yeah, sure.
RIVERA: I -- I may ask Arantxa to answer the part of the other foods. Just let me tell you that inMexico, the diet drinks are not very popular, and are more expensive than the regular ones.
So I -- I see -- for example, here in the United States, you see that the -- the market share of diet drinks is important. InMexicoit's very small. In -- and diet drinks were not taxed. So -- and -- and -- I don't remember. Arantxa, do you remember if we saw any change in diet drinks.
BOLLYKY: You need to press the button.
COLCHERO: Yes. No, so what we see that diet soft drinks are increasing in price, and there -- there was a higher increase after the tax. But we didn't see any substitution for diet soft drinks.
RIVERA: And then home sweet drinks -- we are have -- we are now -- the last National Nutrition Survey was in 2012. The information I gave you about the intake of sugar-sweet beverages came from that survey.
We have a -- one survey in 2016, another one in 2018, and we will be able to see what -- what has happened to the sugar-sweet beverages, the home sweet -- sweet beverages.
BOLLYKY: Great. I have Esther, then Werner, then...
RIVERA: Esther was asking about other foods.
BOLLYKY: That was your question?
QUESTION: No, no it wasn't.
COLCHERO: So inMexicothere was another tax -- an 8 percent tax on what we call nonessential energy-dense food. It's a list of foods that, if they comply with the high energy density -- it's two hundred seventy-five kilocalories per one hundred grams. If they have more than that, they are taxed.
And so, with the same data set, there's another group who evaluated the effect of the tax on purchases, and overall, there's -- the results find a decrease -- around 5 percent decrease.
RIVERA: We don't have information about basic food because this panel of -- panel of survey is really a commercial one. It's really -- it's paid by -- by industry, so it doesn't have products that are not really of interest to -- to industry.
So unfortunately -- but we are going to have the National Nutrition Survey in 2019, and we will see if there is any change in the intake of other foods.
QUESTION: ... Esther Dyson. I'm working to improve health in five small communities in the U.S. and see you guys as a model.
And one other condition I've discovered that's directly -- probably more directly than any of these -- related to sweetened beverages is bottle rot, which is what happens to babies' teeth when you put them to bed with a bottle of sweetened -- whether it's soda or juice or milk with sugar, their teeth disappear.
RIVERA: OK, yes.
QUESTION: And I'm wondering if you're following that -- if it's a big problem inMexico, or the parents have more sense?
RIVERA: Yes, dental caries has been -- it's very clear that sugar in general increases the risk of dental caries. We haven't included that in our National Nutrition Survey, but we are seriously thinking on doing so because caries -- it is not part of our insurance. So the expenses of people on -- on -- on the cavities is really very high. Unfortunately, we don't have information.
BOLLYKY: Great. Werner?
QUESTION: Thank you. I'm Werner Obermeyer from the WHO.
I think you -- you raised a very important point here -- that taxation is one component of the solution. But clearly, if you look at tobacco use and alcohol consumption, taxation directly relates to reduction in use.
So my -- I have two questions -- one is probably easier than the other -- and that is, when you survey -- in your surveillance of data, in decrease of consumption, are you disaggregating the data by age and sex? Because that will give you a good forward-looking perspective on health gains that you can expect.
And secondly, what are your plans? Do you have anything in mind for taxing high-sodium-content food, which is perhaps as important, if not more, than sugar?
RIVERA: Yes, on your first question -- so the unit of analysis in this -- and the unit of the data that we have on the analysis is at the household level. So we are not able to look at individuals within the household.
But we could -- for example, your idea is one that we have been thinking about. So you can look at the composition of the household and then look at differences between, you know, households that have children versus those that do not have children. So I think that we can do that, and I think that you are right, that would be very important.
And then the -- the other question -- sorry, I...
RIVERA: ... the sodium. There are no plans. We now have -- you know,Mexicois now really paying a lot of attention of the implementation of this -- of this package of policies. We are really struggling because implementation in -- for some of them is very difficult.
So I don't think there are now plans to -- to have new policy. But I agree with you that sodium is very, very important and we should at some point include it.
BOLLYKY: Great. Before I shift over to Mary and Missy, who are next, the tobacco-related question made me think of two things, quickly, to ask.
You mention in your talk that it is key that these monies raised from the tax be spent on obesity prevention. As you know, tobacco tax is notorious for not being spent on tobacco prevention. That's certainly true in the United States, but it's even worse globally.
Are you seeing better results with the monies spent from this sugar-sweetened beverages tax? And you also mentioned about the challenge of enforcing this tax. Do you have a sense of, roughly, the money that has been spent in supporting the rollout of the tax?
RIVERA: Yes. So the -- the -- when the tax was approved, the congress passed a resolution at the same time that -- that included that part of the revenues -- I don't remember the amount, but part of the revenues would be used for obesity prevention, and particularly to introduce water fountains in schools. The first year, it didn't happen. But this year, in the -- in the budget, there are -- there is some funds allocated to that. And the goal is to have eleven thousand schools with clean water this year, but to increase that in the next two years, so that at the end of the administration, we may be able to -- you know, to have all the schools with fountain waters.
Now, I think that that's not enough. I mean, I think that we should use a larger proportion of the revenue in obesity prevention, because that -- if this tax is really health-motivated, then the revenue should be used for health.
That's something that -- I mean, I have a dual position, because my institution is part of the government, but it's a research institution at the same time. So we -- we give recommendations to the government, and one of them is you have to spend the money on obesity prevention. That will make it credible. Otherwise it will be difficult to -- to continue selling.
BOLLYKY: Great. The second question was whether you are past the break-even point with this tax. How expensive was the tax to implement? Do you have a sense of the startup costs? Are the revenues generated outstripping those costs?
RIVERA: I don't have an idea of the starting cost. I don't know. Arantxa, do you?
COLCHERO: Well, what -- we asked the Ministry of Finances if there was a cost, and they said no, because we already have everything to tax, -- other taxes, so they said no.
BOLLYKY: Great. Forgive me, Mary and Missy, for delaying your questions. Mary, you're next, and then Missy.
QUESTION: (OFF-MIKE). Maybe I should just -- Mary Mittelman, NYU School of Medicine.
As an epidemiologist, it seems to me that if -- one should also consider the effect of socioeconomic status on risk of diabetes. And I'm wondering to -- the extent to which the trends that you've been seeing, and that we've been seeing, is -- is due to the fact that socioeconomic status is going up.
And in this country, certainly, we see diabetes is much more prevalent -- and so is smoking -- in the lower socioeconomic groups. So is there a way to target that inequality that is a major cause of these illnesses?
RIVERA: That's -- that's a great question, because I think that, on the one hand, the poor population -- In Mexico, for example, you don't see higher prevalences of obesity among the poorest population. You see very even distribution.
But -- but you do see that the increase among low socioeconomic groups is faster than -- than on the high socioeconomic groups. So I think that we are in the middle of a transition, and we may end up like theU.S., for example, and other countries.
But anyway, we know that they are more vulnerable. They -- they have less access to medical attention and -- and -- and so on. So one of our recommendations is to use the tax revenues for obesity prevention by -- primarily on the lower socioeconomic groups that -- by the way, they are the ones that do not have access to information, to medical attention. So I completely agree with you that we should consider these inequalities.
BOLLYKY: Great. Missy?
QUESTION: With the risk of being beaten and thrown out of this room, I work for Coca-Cola. So in the interest of full disclosure.
I wanted to ask you about a study that your colleague Barry Popkin did, and I think he was on -- you know, initial committee with you. It's Popkin at UNC and ITAM.
And as I understand it, the calorie differential averaged out to be about four calories per day, per person with -- because of the -- as a result of the soda tax. Which -- and -- which isn't a lot, four calories a day.
But you know, I -- I take your point that, over many years, four calories can be effective. But there's also a much greater effect on the poor populations.
And so you actually have sort of touched on this in some of your earlier answers, but -- you know, in terms of -- since it disproportionately affects the poorer communities, are there -- you know, what's the way to look at -- is that -- is that fair?
And is it enough of a solution to counterbalance sort of the -- the negative effects that it has on the -- on the poorer communities? And -- you know, what sort of things are you looking at to work on that counterbalance? Now, water fountains is something, I think, that is...
RIVERA: Yeah. No, I think that we are referring probably to the same -- to the same study that was published in the British Medical Journal, because Barry Popkin and Shu Wen are coauthors. So probably it's the same -- the same study.
And as I mentioned, over -- over the whole year, the average per person per year is 4.2 liters -- a reduction of 4. 2 liters. And you -- you may say, "well, it's too little," but it's a 6 percent reduction overall -- it was 12 percent at the end of the year -- in the intake.
And there is not another single policy that has shown -- that has an impact on the reduction of a beverage that is harming people. So I think that it is good news. I mean, as I mentioned before, it's not enough, but it's good news.
Now, the impact on the low socioeconomic group was higher, which means that they benefit more from -- from the tax in terms of reducing more their intake.
So instead of 6 percent, the effect on the poor was 9 percent, and it reached 17 percent by the end of the year. So you have a larger effect, which is expected because the elasticities are higher for the low-income population.
RIVERA: So that's good news because -- and I -- I think that you -- you -- you said is that enough. I don't think is that enough. I think that -- you know, low socioeconomic groups are in such a disadvantage that that differential is not enough. I mean, we should make efforts so that all the other policies also favor more the poorest population.
BOLLYKY: To ask one follow-up question to Missy's question, I think a lot of people were surprised by how large the effect of this tax was. I think the expectation was you needed at least a 20 percent tax to see large results, and when the tax was imposed at 10 percent, people expected only to see modest results. What would you attribute the larger effect to?
RIVERA: Yes, I -- I -- I agree with you. In fact, when you look at the elasticity studies -- of course, you know, they are conducted on cross-sectional data -- the effect -- the expected effect was about 10 percent.
So we had a lower effect -- 6 percent -- which has to do with the fact that the -- the supply side is not fixed. For example, Arantxa published the paper looking at if the tax passed to the consumer, and on -- on the average, it did.
The peso passed to the consumer, but it didn't pass evenly to all consumers. For example, for the low socioeconomic group, the -- the pass-through was smaller, which means that the industry is able to modulate the effect of the tax on prices, and -- and that, probably, then, means that the supply side -- it's not fixed. I mean, you -- you intervene there too.
So at the end, the effect was slightly lower than we expected. But it's -- it's important. I mean, in my opinion, a 6 percent decline in a year with a single intervention is good news.
It is not a magic bullet, I agree. I mean, if somebody thinks that one intervention will solve the problem, I'm sorry, but that's really naive. I think that we really need a set of interventions -- evidence-based interventions. And we have now evidence to say, well, this works as a component of the strategy.
QUESTION: Speaking of -- of other elements... BOLLYKY: (OFF-MIKE)
QUESTION: ... Peter Lehner with Earthjustice.
Other elements of the strategy -- you mentioned them briefly before. Did you have any restrictions on advertising as part of the strategy? And you mentioned labeling on the cans -- were those the type of nutrition labels that we have in theU.S.? Or were they more like the warning labels like we have on cigarettes in theU.S.?
RIVERA: Yes, that's a very good question, Peter. The marketing restriction started later on in 2016, in -- in -- I think it was in July or something like that. And so there are certain times of the day in which the products that do not comply with certain nutritional standards cannot be advertised to children.
QUESTION: On TV?
RIVERA: On TV and on cinema -- those are the two media. The -- the standards, I think, are reasonable -- they -- they are based on theU.S.pledge that was developed in the -- inEuropeby -- by industry, which is really -- I think they are reasonable. And for example, inMexico, sugar-sweet beverages are not allowed in those periods even if they have, for example, lower amounts of -- of sugar.
Now the problem is that the time, which is between 2:00 p.m. and -- 2:30 p.m. and 7:00 p.m., that's the time that -- you know, everybody thinks that children watch TV.
When you -- we conducted a study, and we now know that children watch TV from 8:00 to 10:00 p.m., so that's a non-restricted time. So that's part of the -- of a problem with the design that we have to fix, because the reality is that children are watching TV much later than we thought.
The other thing is that there are some programs, like soap operas and sports -- sports and other -- news, for example -- that are not -- even if -- if they -- if they appear during the restricted time, there are no restrictions, because children are not supposed to watch soap operas.
Well, our surprise was that children watch soap operas. And -- and -- you know, they -- probably with their moms or their parents. So we have to change that. I mean, we have to adjust to the -- to the reality.
On the front-of-pack labeling, I think that the -- the decision inMexicowas to use the GDAs. I don't know if you are familiar with the GDAs. They are like round symbols that provide the percent of the total amount of energy that you consume in a day, or the total amount of sugar and so on.
Those were not our choice. The recommendation by the National Academy of Medicine was more like warning messages. But you know, the government -- that's now the one that is the -- the Mexican standard. The problem, I think, that -- with the GDAs is not that they are bad. I think that they can be used, too, for education purposes. But the thing is that they are not very useful at the time of purchase -- at the point of purchase, because you don't have time to look and decide, you know, what proportion.
So in our opinion, that will be less successful then a warning or a -- you know, choice system that you just point out what are the healthy foods. That's the other system. That would be better, and that would lead more to reformulation from the part of industry. But the decision of the government was to go for the other type of -- of labeling, which is, I think, more similar to the one you have here.
BOLLYKY: Great. I have four questions left. I'm going to start with the people who haven't asked questions yet, and then turn to Esther, if that's OK. So I saw Rajeev first, then Paul, then James and then Esther.
QUESTION: Rajeev Cherukupalli. I'm at Johns Hopkins. I had a question about -- and -- and this is -- the point about advertising brought back memories, because I didn't grow up in this country, and one of the cool things about India, when we got liberalized from a socialist economy, was -- quasi-socialist -- was, A, the amount of advertising we saw on TV, but B, the sorts of cool things that happened in the market.
So the distinct thing was about the pack size increasing, and that was a consumer windfall. So we were kids, and you go in for -- for your soft drink, and they changed from a two hundred-milliliter to a three hundred- milliliter pack.
Now is there a historic point inMexicowhen that happened on the soda side? And contrariwise, with the intervention that you have now, do you see action on what sorts of pack sizes are sold or are being purchased, either on the supply side or on the demand side?
RIVERA: I cannot tell you when we started to have large sizes. In Mexico we have now a three-liter soda. It's -- it's very -- very large. So they are growing. But I -- I cannot tell you exactly when we started. But I -- I can tell you that, probably by the '80s, there was a huge increase in the -- in the sizes.
Now there was -- one of the -- the school regulations did something that I think is nice, which -- you know, some of the products -- the industrialized products are restricted during the week except for one day, Friday. But on one day, there are restrictions on the size of the package.
So now we have smaller package sizes that are manufactured to be sold in schools -- but they are now sold everywhere. So I think that that could have an effect. You know, that could make children buy smaller package sizes. But we -- we have to wait and see if that really makes a difference.
BOLLYKY: Great. Paul?
QUESTION: Yes. Paul Sacks, Multi-Asset Strategies. Mine is sort of a derivation from the last question. Did the beverage producers retaliate when the tax came along, either by changing the bottle size or reducing price in any way?
RIVERA: Well the -- can -- can you talk about the -- the price reduction, because price reduction was different depending on the size.
COLCHERO: Yes, so what we saw is that the prices increased more for the smaller package size, compared to the larger package size. And what happens inMexico-- probably here, also -- is that the price differential is very big, so that relatively, they're very cheap, the large -- larger package sizes.
So we believe that this is -- this was a strategy to not -- to incentivize people to still buy the larger package sizes, because the increase in price was -- was lower, compared to the smaller sizes.
BOLLYKY: Great. James?
QUESTION: James Robinson, from a consultancy called APCO.
I'm interested in the type of tax that you instituted. As I understand it, it's a -- a flat tax, and so regardless of if it's twenty grams of sugar per one hundred milliliters or five grams of sugar per one hundred milliliters, it's the same one peso per -- per liter.
Has there been discussion or analysis of actually doing a sliding scale so that the beverages that are more dense in sugar actually get taxed more, and there's an incentive for manufacturers to reduce the amount of sugar concentration in their beverages, so over time -- you mentioned reformulation -- industry can hopefully meet the health needs that are where -- where they're at?
RIVERA: Yes. In -- in our original proposal in the discussions with the Ministry of Finances, one of our proposals was precisely that -- you know, to have, like, different levels of taxes.
Since this was -- you know, this was a new issue to have a tax on the sugar-sweet beverages, they chose to do something that would be simpler and simple to administer, which was just a flat tax.
Now, there have been some discussions, and in fact there was an open discussion in the -- in the congress this year, to have a differential tax level. And it didn't pass in the -- in the congress.
And I think that the reason is that most people thought that 10 percent is already too low, and the proposal was to reduce the tax on those that had less than five grams of sugar, rather than increase the tax on those that have, for example, more than ten.
But I think that we -- people are -- you know, a lot of -- both industry and congress and -- and we are discussing this issue, because it may be a good idea to have a differential tax. But the -- my -- my -- the bottom line is that we need a higher tax to do that. We need that at least those beverages that have, for example, ten grams or more, have a higher tax, and those that have less a lower tax -- with one caveat.
There are some beverages that for children, and the cutoff points for children should be different, because we really want to avoid children to be exposed to sugar-sweet beverages early on, because they become habituated to sugar-sweet beverages so -- but -- but I think that that could be good idea.
BOLLYKY: Great. Esther, thank for your patience.
QUESTION: Sure. Thank you. So this is a more subjective question. The average person inMexico-- are they completely aware of this? Some people know about it? Do they now think, "I know sweet beverages are bad for me, but I still like them"?
On -- on the soap opera serials, are there are people trying to lose weight and avoiding sweetened beverages? I mean, is it in the popular mind? Or this just something that is influencing them without them being aware of it, but they see prices are high?
RIVERA: We will not -- we will know more about that after our survey, because we are going to be asking some questions about attitude towards sweet beverages.
But the debate -- the debate about the tax was so important that I think that it brought a lot of attention, and a lot of people are now aware. For example, a lot of people now tell you, "well, we know that drinking too much can lead you to obesity and probably diabetes."
But this is really a personal opinion. I'm not sure -- what is important is that sometimes the debate per se may also have an impact. I mean, even before you implement, for example, a tax, just the fact that there is a public and social debate -- that per se may -- may have an impact in terms of influencing preferences. And that would be nice to -- to study. Unfortunately, that's very difficult data to -- to collect.
BOLLYKY: (inaudible) do you want to press the button? I know who you are, but others may not. I don't think the mic was on.
QUESTION: Oh sorry. I'm Yanzhong Huang with the Council on Foreign Relations.
You recognize that increase in soda tax represents just a single intervention, andMexiconeeds a comprehensive strategy. And we are aware that the UN's sustainable development goals. The SDG provides such a comprehensive strategy -- you know, improve health and well- being.
I'm curious, you know, since that's -- the SDGs -- they just rolled out the start of this month, whether Mexico has a strategy, or are planning a strategy to implement the SDGs, you know, that has actually (ph) reducing the NCDs and the risk factors, you know, as a target for goal three.
RIVERA: So your question is if we have additional strategies, besides the one that I mentioned before?
BOLLYKY: Yeah, on the UN sustainable development goals.
RIVERA: Well, I think that so far we have a -- a more or less comprehensive strategy, the one that I mentioned, and we are really struggling to really make it work.
But certainly, I think that that will come more in the discussion of next year's package, because certainly noncommunicable diseases require, in addition to -- to this intervention, some other interventions that have more with prevention in the -- in the health system, and I think that there, we can really improve more.
But these ones are the -- the ones that have been really -- the interventions that we have are the ones that have been recommended or promoted usually by international organizations.
BOLLYKY: Great. Well, we only have three minutes left so I'm going to ask a double question, you can answer it however you choose and sum up your final remarks.
The first is what's next for Mexico on this tax. You mentioned the possibility of creating a differential tax for different products. Do you see that as next? What have the preliminary results from the first year of this tax done to build the environment for adjusting or expanding the tax moving this forward?
The second question is that you're someone who has spent not only a lot of time in Mexico, but also a lot of time in the United States and elsewhere. What from Mexico's experience with this tax is generalizable? What are the lessons of this tax that could or should be applied elsewhere -- whether in the United States or elsewhere?
RIVERA: Yes, I think that what is next for Mexico is that I think that we have enough evidence to, first of all -- you know, keep the tax, because that is discussed every -- every year.
Probably increase the tax, maybe, in some products, like -- you know, having a differential tax -- tax more the -- the products that are -- have high content of sugar, and of course strengthen the other components of the strategy. I mean, that's very important.
And I think that what is generalizable -- just the general notion that fiscal policies in general -- and it could be taxing these products or other products, depending on each country -- fiscal policies can be used for obesity prevention, and our -- our study shows that there is a decline in consumption, and that we -- we should think that, usually, fiscal policies are not a magic bullet. But they really need to go along with other components of a comprehensive strategy.
BOLLYKY: Great. Well I'll hope that you'll join me in thanking Dr. Rivera for his excellent remarks.