By Marifeli Pérez-Stable and Christian Gómez, Jr. Latin America Advisor September 25, 2007
WASHINGTON, DC—According to Fortune magazine, Mexican mogul Carlos Slim has surpassed Microsoft founder Bill Gates as the world's richest man. Slim's estimated $59 billion empire—which includes over 200 companies in telecommunications, construction, tobacco, mining, and banking, among others—constitutes a third of the Mexican stock market and more than five percent of the country's 2006 GDP. While Bill Gates' dominance may be on the wane in the wake of anti-trust actions in the United States and European Union, Carlos Slim's command over Mexico's economy has only strengthened of late. This may be because Mexico remains an economy dominated by public and de facto private monopolies which thus far have been able to deflect most efforts to stimulate competition.
Mexico's Federal Competition Commission, or Cofeco, established in 1993 to enforce the nation's first antitrust legislation, has struggled to break up private monopolies. Its only recourse has been fining companies that engage in monopolistic practices; the agency is powerless to break up firms that exert de facto monopoly power in their sectors. The commission, moreover, lacks the authority to enforce payment of fines; only 15 percent of fines imposed are collected. Barring an increase in political capital and resources—its budget last year was only $14.3 million dollars—Cofeco is unlikely to fulfill its mandate.
Mexican president Felipe Calderon, whose National Action Party (PAN) ended the PRI's political monopoly in 2000, campaigned on a pro-competition platform in 2006. But at the height of the presidential campaign in March 2006—when Congress rushed to pass a law widely seen as consolidating the dominance of Televisa and its smaller rival, TV Azteca, over Mexico's broadcast sector—the PAN and the PRI supported the law. Calderon and the PRI's presidential candidate, Roberto Madrazo, kept silent. To its credit, the PRD opposed the law, while its presidential candidate, Andres Manuel Lopez Obrador, asked for a postponement of a vote on the law in the Senate.
In June of this year, the Supreme Court struck down parts of the so-called "Televisa Law." In a blow to Televisa and TV Azteca, which together control 95 percent of television advertising revenue in Mexico, the Court declared unconstitutional the renewal of broadcast licenses without a competitive tender as well as free entry into digital services without having to bid for concessions. The Court's decision is an important first step which should build momentum for Calderon and autonomous bodies such as Cofeco.
According to the Bank of Mexico, the lack of competition reduces annual economic growth by one percentage point. Calderon and Congress must demonstrate the political will to open the domestic economy to competition. Lip service alone will not do the trick. Until then, even with increased budgets, Cofeco will struggle to get the job done. Calderon rode into Los Pinos on the votes of the Mexican middle class, the immediate beneficiaries of a more competitive economy. For their sake and Mexico's, he should be bold.
Marifeli Pérez-Stable is Vice President for Democratic Governance at the Inter-American Dialogue. Christian Gómez is a Program Assistant at the Dialogue.
