Mexico's Stubborn Lack of Choices
Oligopolies abound, leaving consumers with few options and high prices. The scarcity of competition is seen as an economic impediment.
By Marla Dickerson
Times Staff Writer
April 16, 2006
MEXICO CITY — When voters tossed out the ruling party in national elections six years ago, they gave a resounding no to a continuation of a 71-year political monopoly."Mexico has been a paradise to create and sustain unhealthy monopoly practices," said Mexico City political scientist Ricardo Raphael, a researcher at the Monterrey Institute of Technology and Higher Education, who blames weak antitrust legislation and Mexico's long history of crony capitalism for concentrating power in relatively few hands. Economists say business monopolies have saddled Mexican consumers with high prices, slowed the country's economic growth and exacerbated the divide between rich and poor.
*****************************************************************************Nearly half of Mexico's 106 million people live in poverty. Yet it has more billionaires than Switzerland — 10 last year — according to Forbes magazine's latest list of the world's richest people. Most of them built their fortunes in Mexican industries that have little or no competition. *****************************************************************************And the power brokers may only be strengthening their hands these days. Mexico's business barons have been aggressively defending their turf, rivaling the nation's presidential contenders for headlines. Attempts by Mexico's Federal Competition Commission to put teeth into the nation's antitrust laws have run into a buzz saw of opposition from business leaders. Topping the agency's wish list is having the ability to break up companies whose market power is deemed excessive. It's a standard tool provided to regulators in the United States and other developed economies, but one that doesn't exist in Mexico. Corporate titans here are working furiously behind the scenes to keep it that way. Eduardo Perez Motta, president of the competition commission, vented his frustration at a recent news conference. "It's incredible that these [businessmen] are fighting to maintain their privileges," Motta said. "They don't have the public justification to do it, but that's what they are doing [using] all manner of sophistry, legal and otherwise."Mexico's oligopolies have their roots in protectionist philosophy that shaped the nation's industrial policy after World War II. The goal was to reduce reliance on imports by building up strong domestic players in key sectors of the economy. Through the years, the PRI-controlled government kept a firm hand in the economy through state-owned companies and chummy relationships with some pro-regime entrepreneurs, who were sheltered from competition. Televisa, for example, functioned for decades as a de facto government mouthpiece in exchange for a virtual monopoly on TV broadcasting. The late Emilio Azcarraga Milmo, who headed the company, once publicly declared himself "a soldier of the president and at the service of the PRI" and reportedly pledged more than $50 million at a party fundraiser to show his gratitude for his company's privileged status. A devastating financial crisis in the 1980s forced Mexico to open itself to more foreign investment and to unload a spate of state-owned firms. But experts say Mexico's privatizations in some respects saddled the nation with the worst of all worlds: Instead of breaking up public enterprises to spark competition, the government simply transferred them to new owners."They replaced public monopolies with private ones," said Celso Garrido, an economist at the Autonomous Metropolitan University in Mexico City. The best known of these transactions was the 1990 sale of state-owned telephone company Telmex to a consortium led by Mexican entrepreneur Carlos Slim, who used the company as a springboard to expand into mobile phone service and telecommunications ventures throughout Latin America. Forbes recently estimated Slim's fortune at $30 billion, making him the world's third-richest man, behind Bill Gates and Warren Buffett. Slim has shown a talent for spotting undervalued assets. But critics say hard-nosed tactics have helped him retain a lock on the lucrative Mexican telecom market. Telmex and America Movil, Slim's cellphone company, last year garnered more than 60% of their combined $31 billion in revenue from Mexican consumers.The office of the U.S. trade representative repeatedly has criticized Telmex's use of Mexico's ponderous legal system to block efforts by Mexican regulators to spur competition. Mexico's central bank governor, Guillermo Ortiz, recently blasted Slim's telecom companies for hampering the nation's competitiveness by charging Mexican businesses and individuals some of the highest rates on the planet. Slim strongly denied Ortiz's assertions and blamed government monopolies and inefficiency for Mexico's woes. It was an unusual and highly publicized spitting match whose U.S. equivalent would see Microsoft Corp. founder Gates exchanging insults with Federal Reserve Chairman Ben S. Bernanke."The banking system mostly serves the interest of big corporations," said Alfredo Coutino, senior economist at West Chester, Pa.-based Moody's Economy.com. Mexico's public monopolies may be even harder to crack. (INFOBOX BELOW) Kings of their markets When it comes to competition, less is more for Mexico's oligopolies, which dominate key sectors of the economy. Market share of companies in selected industriesBroadcasting: Grupo Televisa -- 56%*, TV Azteca -- 38%*Cement: Cemex -- 54%, Holcim Apasco -- 23%Beer: Grupo Modelo -- 57%, Cerveceria Cuauhtemoc Moctezuma-- 43% Tortillas/corn meal: Gruma -- 73%, Minsa -- 15%*Percentage of television stations owned
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