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Mexico: drink this

Monday, October 13, 2014

Water producers could benefit from new Mexican tax policies.

So could advisors to towns and cities on water management.

The impact of the new policies is likely to be small.

On the other hand, taxes on high-calorie drinks could give efficient producers an opening.

In terms of opportunities, bottled water is an option.

In a country with limited recycling, discarded bottles are an issue.

On the other hand, bottled water gives many Mexicans a clean product at a reasonable price.

An alternative is a public system of water works, some of which are inefficient or worse.

Also, someone would need to subsidize users, who can’t pay.

On the other hand, well-managed public works are an efficient way to provide potable water and waste-management services.

At around $0.10 per liter in taxes and related costs, the new policies will not radically change the market.

The average Mexican drinks 150 liters a year of high-calories beverages.

With the same demand, he or she would pay an additional $15 a year – not a big deal in a country, in which annual income per person is close to $11,000.

But it could matter to millions of Mexicans, for whom $15 is 1% of their annual income, as well as to families, who would annually spend an additional $100 or more.

Mexico consumes more high-calories beverages than any other Latin American country.