Mexico regulations: A competition law with teeth

by The Economist Intelligence Unit, December 16th, 2010.

Mexico’s Senate has approved a more potent competition law, designed to enhance the powers of the government to combat anti-competitive practices and the monopolies that dominate many sectors of the Mexican economy. However, opposition senators softened the bill, first approved by the Chamber of Deputies in April, and it must be returned to the lower house for consideration, where its immediate prospects are uncertain.

Since taking office on 2006 the government of President Felipe Calderón has tried to take a stronger role in tackling public and private monopolies, which present a major obstacle to market competition in Mexico and hinder the economy’s overall competitiveness.

Since the existing Federal Competition Law (Ley Federal de Competencia Económica), was passed in 1992, powerful special-interest groups have backed the dominant market players (both public and private), and these groups have resisted giving the competition agency, the Federal Competition Commission (Comisión Federal de Competencia—Cofeco), a more robust role. Consequently, Cofeco rulings have tended to be cautious, though the agency has more recently begun to openly target industries with monopolistic characteristics.

The telecoms and oil industries are regularly at the centre of the reform debate. The telecoms sector is dominated by the flagship companies of Carlos Slim, a Mexican billionaire; these companies include Teléfonos de México (Telmex) in fixed-telephone lines and América Móvíl in mobile-telephone lines. In the oil sector, state-owned Petróleos Mexicanos (Pemex) controls the market and generates about one-third of government revenues. Other industries with monopolistic or duopolistic characteristics include television broadcasting (dominated by Grupo Televisa and TV Azteca), beer and soft drinks (Grupo Modelo and Fomento Económico Mexicano, respectively), and cement (Cementos Mexicanos). (continue reading… )