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For the past two years, Eduardo P?rez Motta, president of Mexico's Federal Competition Commission (CFC), has been trying to make the Mexican economy more competitive by cracking down on the country's many monopolies and duopolies in businesses ranging from telecommunications to brewing, cement, and freight transport. But his rulings were not enforceable. Now, thanks to a new Competition Law that took effect in June, the CFC's rulings are legally binding.
The agency can conduct its own investigations into anti-competitive practices, block mergers if they could lead to a monopoly, and levy hefty fines on companies (see BusinessWeek.com, Is the Game Over for Mexico's Monopolies?). P?rez Motta, a UCLA-trained economist who served as Mexico's representative to the World Trade Organization in 2001, now looks forward to wielding some clout in the remainder of his 10-year tenure at the CFC.
He spoke recently with BusinessWeek's Mexico bureau chief Geri Smith. The following are edited excerpts from their conversation:
How does the new competition law make your job easier?
This is one of the best competition laws in the world. Now we can conduct our own investigations into such things as price-fixing and monopolistic practices. We can refuse to authorize certain mergers if they would hurt competition. The CFC can help the government design regulations to promote competition. Now our opinions and recommendations to the federal government will [in many instances] be [binding].
But it seems that every time the government rules against a company like telephone giant Telmex (TMX
), the company comes in with an army of lawyers and blocks you.
We have to attack the problem on various fronts. First, we have to improve the legal quality of our cases. We have to open a communications channel with the justice system, reaching out to judges, even on the Supreme Court, [to explain] that we need their support.
And we are hiring lawyers and outside advisors to help us improve our resolutions and legal cases. We have begun to win some important cases involving fines we have levied. We're far from victorious, but we're starting to see results.
Mexico's economy is viewed as fairly open. But foreign investors often complain there are barriers to entry.
We have a serious competition gap in many different sectors of the economy. Mexicans have become accustomed to high prices, a lack of competition, and few consumer options, but that's a really serious problem for our country. Greater competition is a powerful instrument that could benefit a large number of [poor] Mexicans who have been excluded from economic development up till now.
What areas of the economy need to be shaken up?
Areas that directly affect the productivity and competitiveness of small and medium companies in Mexico: telecommunications, transportation, energy, and the banking sector. Since October, 2005, we have been calling for greater competition in telecommunications, for example. Unfortunately, we haven't yet seen telecom "convergence" involving greater competition to offer [bundled] telephone, pay TV, and Internet services.
Why is competition in telecom so difficult in Mexico? Telmex, which was privatized 16 years ago, controls 94% of all fixed telephone lines and 76% of cellular lines.
Telmex gets really mad at us. But where I come from, there's a saying, "La burra no era arisca." That means, the donkey used to be trusting, but over the years a number of bad experiences taught it to lose its trust. The CFC is the donkey.
On Oct. 2 the government published new rules allowing cable TV companies and other telecommunications companies, including Telmex, to offer Internet, telephone, and video TV services over their networks. Under its original concession, Telmex wasn't allowed to offer video. Now that it can, it will be even more powerful. Is that a defeat for you?
No. We're satisfied that these new rules will boost competition by allowing in more players, but we are going to keep a close eye on Telmex to make sure it lives up to its interconnection obligations.
Domestic airfares have really come down recently with the advent of low-cost airlines.
For the first time in Mexico, we're starting to see much lower airfares. The CFC has backed that competition by refusing to let the government sell Aerom?xico and Mexicana airlines [which were both state-controlled] to a single bidder. We have not permitted cross-ownership between airport concessionaires and airline owners.
You have eight years left in your 10-year term. What's next?
Eight years is very little time for everything we need to do. We have a $15 million budget, one of the lowest of Mexico's regulatory agencies. We want to hire some more people, especially lawyers. At the beginning of next year, we plan to look into the banking sector, at the high commissions banks charge??e've gotten a lot of complaints.
A new government led by President-elect Felipe Calder??n takes office Dec. 1. Do you expect him to tackle the competition issue head on?
I hope the next government really takes on the issue of competition so that our market economy can produce much better results for the people who currently are excluded from the mainstream. In order for the economy to grow faster, we need to promote more competition.