US agribusiness Archer Daniels Midland has opted to challenge the Mexican government's 20 per cent 'discriminatory tax' on soft drinks containing high fructose corn syrup.
The company has started an 'arbitration proceeding under NAFTA through which ADM will seek to recover the damages it has incurred as a result of the soft drink tax', the company said in a statement this week. In other words, it is looking for $100 million in compensation.
ADM argues that the tax is designed to promote the use of Mexican sugar in soft drinks, because they are exempt from the tax, rather than the 20 per cent tax imposed on high fructose corn syrup.
The Mexican congress first imposed the tax on 1 January, 2002, since that time ADM's HFCS joint venture plant in Guadalajara, Mexico has stopped production of HFCS-55 for soft drink use, and the company has ceased exporting HFCS-55 from its US plants for resale to Mexican soft drink bottlers.
Mexico is the world's second largest consumer of soft drinks, and the market for HFCS in that country was growing rapidly until the Mexican Congress imposed the discriminatory tax.