Introduction to the Mexican 2026 Economic Package
In the 2026 economic package, Mexico’s Secretariat of Finance and Public Credit (SHCP) proposes increasing taxes on the consumption of certain products deemed harmful to health, such as sodas and tobacco.
Tax Increases on Harmful Products
The SHCP aims to discourage consumption rather than increase revenue. However, the projected income from these measures is nearly 137,000 million pesos, including those related to gambling and violent video games. This suggests a revenue-generating intent.
The demand for these products is considered inelastic, meaning that price increases have a relatively small impact on consumption.
A study by Raymundo Campos and Eduardo Medina in the Latin American Economic Review showed that, in Mexico, a one-peso per liter increase in the sugary beverage tax resulted in a price hike of 1.12 pesos for sports drinks and 1.52 pesos per liter. This indicates that price increases are more than proportional to tax hikes.
This occurs primarily because the companies marketing these beverages have market power. With few competitors, they can raise prices without losing customers; conversely, more competitors lead to smaller price variations.
Moreover, lower-income individuals bear the brunt of these taxes since they consume more soda compared to higher-income groups. In some communities, soft drinks are more accessible than potable water.
Similarly, the opposition’s proposal to remove the IVA (Value Added Tax) on bottled water may not significantly boost its consumption across the population. Habits depend on various factors, including price relations with other goods and availability of caloric content, which is linked to income levels.
Healthy Taxes as a Double-Edged Sword
These “healthy taxes” can serve as both a revenue-generating measure and a public health policy, as initially promised during Enrique Peña Nieto’s administration. The intended use of these funds was to combat health issues related to excessive sugar consumption and initiatives like building school water fountains.
However, without clear mechanisms in the budget, these promises risk remaining unfulfilled. The SHCP’s 2026 proposal lacks a dedicated fund for these purposes, making sustainable health programs challenging.
Mexico requires consistent funding for initiatives such as promoting healthy nutrition and diabetes care, among others. But these programs need a reliable source of funding, not subject to annual fiscal policy changes.
This situation calls for a societal reflection on the quality of public spending. Health resources are an example, but the same applies to public investments. Are high-speed trains more crucial than unconditional support for Pemex, or should priorities include roads, water infrastructure, modernized customs, specialized clinics, school equipment, and more?
These questions become pertinent each September when the economic package for the following year is presented, and analysts reiterate the need for comprehensive tax reform. Where will additional revenue come from, who will bear the burden, and how will the funds be allocated?
Key Questions and Answers
- What is the main proposal in Mexico’s 2026 economic package? The SHCP proposes increasing taxes on harmful products like sodas and tobacco.
- Why are these tax increases being considered? The aim is to discourage consumption of these harmful products rather than solely increase revenue.
- How do price increases compare to tax hikes? Price increases tend to be more than proportional to tax hikes due to market power held by beverage companies.
- Who is most affected by these tax increases? Lower-income individuals who consume more soda are disproportionately affected.
- Can these taxes fund health initiatives effectively? Without a dedicated fund, sustainable health programs are challenging to implement.
- What questions should be considered regarding public spending? Prioritize essential areas like health, education, and infrastructure while ensuring consistent funding sources.
