| | |  Business News | June 2009 
Mexico Struggles to Make Industries Competitive
 Noel Randewich - Reuters
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June 23, 2009
Mexico City - Mexico is taking steps against near-monopolies that the government blames for stunting the nation's growth, but it hasn't been easy to wrest control from some big companies.
Dominating Mexico's television industry is tycoon Emilio Azcarraga's Televisa (TLVACPO.MX)(TV.N), which has a 70 percent share of audiences and owns the country's largest cable operators and a satellite operator. Rival TV Azteca (TVAZTCACPO.MX) controls most of the rest of the television market.
And Mexicans joke that it is difficult to go a day without putting money in the pocket of Carlos Slim, who owns the nation's largest telephone operators as well as stores, restaurants, a cigarette maker, an airline, and construction companies that build and manage toll roads.
Last month, President Felipe Calderon announced that Mexico's state power utility would find a private operator to manage a new telecom backbone, piggy-backed on its nationwide fiber optic network.
That long-awaited plan is meant to give small telephone companies an alternative to dealing with Slim's Telmex (TELMEXL.MX)(TMX.N) fixed-line operator, which controls 80 percent of the market and much of the telecom industry's infrastructure.
In the absence of watershed improvements to competitiveness, freeing up the fiber optic network is one of many small steps the government and antitrust agency Cofeco have taken to nudge telecommunications and other industries toward more balanced playing fields.
"We're still very far, but I think they're steps in the right direction," Cofeco head Eduardo Perez Motta told Reuters last month.
Calderon has vowed to take a firm hand in the television, cement and telecommunications industries.
But despite legal changes in 2006 that gave Cofeco more power to investigate monopolistic practices, it still depends mostly on persuasion to influence policy.
Legislators have yet to redraft a broadcasting law that the Supreme Court had struck down as illegal in 2007, saying it gave more privileges to already-dominant Televisa. Lawmakers passed the law in 2006 when they were up for election.
"The media powers are formidable," said Jose Antonio Crespo, a political analyst at Mexico's CIDE think tank. "If you confront them, they can cause you problems. If you work with them, they give you great benefits."
Televisa declined to comment.
Cofeco recently launched a probe into possible collusion between dominant cement maker Cemex (CMXCPO.MX) (CX.N) and other big companies, but that process could take years.
Cemex denies dominating Mexico's cement industry and, in a statement to Reuters last month, said it had not broken the law.
Critics accuse Slim's Telmex and America Movil (AMXL.MX) (AMX.N) cellphone company, which also has an 80 percent market share, of unfairly stifling small competitors by charging high prices to connect calls and use their network infrastructure.
Slim, one of Mexico's biggest employers, insists his companies are not predatory and says the country needs big corporations in order to be internationally competitive.
Ongoing investigations by Cofeco could lead Telmex and America Movil to be declared officially "dominant" in their markets, opening them up to extra regulation to curb their power.
Telecom regulator Cofetel has taken steps to make it easier for small players to compete against Telmex, a former state monopoly, and America Movil, like letting television cable companies offer Internet and telephone services. But that has done little to reduce their overwhelming market share.
Telmex and America Movil deny dominating their markets and Telmex this year cut its capital expenditure by about a third, blaming new rules forcing it to make some of its infrastructure available to rivals.
"A lot more has to be done to reduce Slim's monopolies," said CIDE's Crespo.
Cofeco has urged legislators facing mid-term elections in July to let foreign investors take controlling stakes in Mexico's land-line telephone companies.
Allowing Spanish giant Telefonica (TEF.MC) to compete in Mexico's mobile telephone market has helped whittle America Movil's market share down from nearly 100 percent a few years ago.
Measures deemed good for competition are generally supported by all parties, but often fail make their way into law.
Proposals in Congress to increase fines for monopolistic practices to 10 percent of annual sales and expose executives to criminal charges have floundered.
"We constantly lobby, but private-sector lobbyists are big," Perez Motta said. "And the truth is that they're very effective."
(Editing by Lisa Von Ahn) |
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