Mexico’s Congress debates polemic fiscal reforms
Mexico’s lower house, the Chamber of Deputies, approved fiscal reforms which include the introduction of value-added tax (IVA) on junk food and soda last Friday. The controversial bill was then introduced to the Senate on Tuesday, where it faces a tricky ride and must be voted on by October 31.
The package pushed by President Enrique Peña Nieto also includes the imposition of 16-percent IVA on food for pets – which animal-rights groups have warned will lead owners to abandon their cats and dogs – but a broadly unpopular proposal to tax private education has been dropped.
Under the proposed legislation, sugary drinks will rise in price by one peso per liter, the price of high-calorie foods (defined as those with over 275 calories per 100 grams) will rise by five percent, and tax on chewing gum will go up by 16 percent. The government says the aim of these taxes is to fight obesity, as Mexico is the number-one consumer of Coca-Cola products and recently overtook the United States to become the most obese of the world’s largest nations.
While health experts, including the World Health Organization, have applauded the proposed measures, business leaders have protested, concerned by the possibility of diminished profits and consequent job losses.
Emilio Herrera, president of the National Association of Soft Drinks Producers (ANPEC), warned on Tuesday that taxing sugary beverages will cause a decrease in sales and a decline in production, leading the industry to lay off 10,000 employees immediately and other 20,000 in the medium term. Aside from drinks producers, sellers – who receive around 30 percent of profits from sales – will also be hit hard by the tax, Herrera said.
The private sector has also called for the reforms to include a firm, fixed limit to the public deficit. Raising taxes will do little to help the federal government increase revenue if the deficit is not reduced, Luis Foncerrada, director of the Center for Economic Studies of the Private Sector (CEESP) argued this week.
While the fiscal reforms could bring in an additional 240 billion pesos (1.4 percent of GDP), the deficit next year will reach 721 billion pesos (4.1 percent of GDP), Foncerrada said. This will mark the most significant deficit in 25 years, since it reached 4.6 percent in 1989.
“This certainly puts pressure on finances,” Foncerrada said. “It’s very important that we impose an absolute limit on borrowing in the Senate now.”
Proposed by the incumbent Institutional Revolutionary Party (PRI), the reforms received the support of the New Alliance Party (PANAL), the Green Party (PVEM) and even the leftist Party of the Democratic Revolution (PRD) in the Chamber of Deputies. The latter only supported the bill after the PRI agreed to drop plans to tax food and medicine. The PRD was also placated by the PRI’s initiative to introduce unemployment insurance and universal pensions for those aged over 65.
The business-friendly National Action Party (PAN) remains firmly opposed to the reforms, which it says will hit the middle classes the hardest, while the leftist Labor Party (PT) and the Citizens Movement also voted against the bill in the lower house.
PAN President Gustavo Madero described the reforms as “very toxic” this week, while Jorge Luis Preciado, the PAN’s coordinator in the Senate, vowed to impose “enough pressure” to ensure that the bill is modified and becomes “less harmful to Mexicans.” Preciado added that the PAN is opposed to the tax on pet food, particularly in the cases of the estimated 500,000 blind people who are reliant upon guide dogs.
The PRI needs the votes of 65 senators to pass the reforms without further modification; it can currently count upon 61 votes, including the support of the PVEM. If the PRI can maintain the existing alliance from the Chamber of Deputies together then it will be able to pass the legislation unchanged, but it may struggle to keep the PRD onboard unless it bows to pressure to limit the state deficit and drop plans to raise IVA in border areas from 11 to 16 percent.
Marcelo Ebrard, the popular former mayor of Mexico City, has voiced frustration at his party’s present support for the PRI, arguing that the PRD should represent its supporters and oppose the government or risk losing votes.
“There may be some issues or initiatives on which we agree with the government, but what we are seeing right now is the party backing the government’s initiatives extremely closely and that seems very negative to me,” Ebrard said.
Governor blocks implementation of oral trials in Jalisco
To the displeasure of Jalisco’s judiciary, Governor Aristoteles Sandoval has vetoed next year’s planned introduction of open court hearings where prosecutors and defense attorneys present their cases before a judge.
Under a mandate from Congress to make the transition to U.S.-style oral trials by 2016, some states in Mexico are already phasing in the new format.
Few Mexicans have much faith in the current flawed justice system, which consists of lawyers submitting written evidence to judges, with no jury present and no verbal testimony from the prosecution or defense. It is generally considered inefficient, lacking in transparency and open to corruption.
Despite the looming deadline, Sandoval – presumably for financial reasons – decided to veto the Criminal Procedure Code, which included a provision for the implementation of oral trials from next year, that was approved by the State Congress in September. The decision is a blow to Chapala, which was in line to become the first municipality in the state to conduct oral trials for minor crimes.
Judicial counselor Jaime Gomez rejected the argument that the state does not have the funds to begin conducting oral trials. Initial implementation in a sole judicial district such as Chapala would not incur any major expense, he noted last Friday, inferring that Sandoval’s veto was politically motivated.
Another judicial counselor, Alfonso Partida Caballero, said that the governor’s decision was “worrying” and would position Jalisco’s justice system as one of the most backward in Mexico.
In vetoing the code, Sandoval rejected a proposal that would have seen 978 million pesos (around 80 million dollars) spent on the “final” modernization of the state justice system. Even though this would have accounted for almost half of the judiciary’s draft budget for 2014, Partida said it provides no pretext for Sandoval’s decision.
“Chihuahua, Mexico State and Morelos are already allocating 100 percent of their resources for oral trials. Nuevo Leon is at 80 percent and so on. This issue has not been taken seriously in Jalisco and the only thing the executive demonstrates is a lack of interest and vision,” Partida said.
Luis Carlos Vega, the president of Jalisco’s Supreme Court, defended Sandoval’s decision on Wednesday. “I think it’s a very responsible and courageous veto,” he said. “The governor was brave to say that you must first have the resources and the infrastructure and then you can make adjustments to laws.”
Mexican president criticized over expensive new executive jet
Lopez Obrador, who lost the 2012 election to Peña Nieto, called for the president to instead use the funds to aid the communities in Guerrero that were devastated by last month’s severe tropical storms.
“I propose directly to Enrique Peña Nieto, and I hope that he listens, that he cancels the purchase of a presidential aircraft for seven billion pesos and that this money is used in full to support the reconstruction of Guerrero,” Lopez Obrador said, describing such expenditure on a presidential jet as an insult to both Mexico and the state of Guerrero.
The total cost of purchasing a state-of-the-art Boeing 787-8 Dreamliner and equipping it for presidential use will be 7.52 billion pesos (584 million dollars) and it will leave Mexico indebted until 2027, according to Spanish-language media outlet Emeequis. A contract for the purchase of the plane was signed by Boeing and Mexico’s Secretary of Defense last November, a month before Peña Nieto took up office.
Mexico’s current equivalent of Air Force One is the Avion Presidente Benito Juarez, a Boeing 757-225. It has room for 66 passengers and 15 crew members and includes a private office, bedroom and bathroom for exclusive use of the president.
During his 50th birthday celebrations in August 2012, Peña Nieto’s predecessor President Felipe Calderon reportedly told guests that drug kingpins had threatened to bring down the presidential plane when he was on board.
Calderon, who launched a major offensive against Mexico’s drug gangs upon taking up office in December 2006, was once warned that his plane could come under attack during a planned trip to Tamaulipas, but opted to go ahead with the flight.
“Before the trip I recorded a message for my children where I told them that in case something happened to me I wanted them to know their dad was doing what he believed in,” Calderon said, according to Spanish-language daily El Universal.
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