To Reform Mexico’s Economy, Peña Nieto Must Tackle ‘Culture of Monopolies’

Newly inaugurated Mexican President Enrique Peña Nieto promised during his campaign to triple Mexico’s GDP growth rate to 5-6 percent annually. In order to even approach that lofty goal, Peña Nieto must confront the country’s bloated monopolies that discourage competition and raise the cost of goods and services for Mexicans. Complicating this already monumental task is Mexico’s entrenched culture of monopolies, which will be harder to defeat than the actual monopolies themselves.

When it comes to Mexican monopolies, the big offenders are well-known: Telmex, the telecommunications conglomerate owned by the world’s richest man, Carlos Slim; Televisa, the largest multimedia company in Latin America; Cemex, a building material supplier and cement producer with a reported market share of nearly 90 percent; and Walmex, Wal-Mart’s branch in Mexico and the nation’s largest private sector employer, to name a few. According to the OECD, the lack of competition in Mexico’s economy has cost the country $129.2 billion between 2005 and 2009, or 1.8 percent of GDP per year. Peña Nieto has stated broadly that Mexicans should have more consumer choice and that companies should be made to compete, ensuring lower prices and better quality. But although he has promised to “fight” monopolies, he has avoided mentioning the specifics of which ones and how.

To complicate matters, the Mexican government runs two of the country’s largest monopolies, both of which are constitutionally mandated. Pemex, the state-owned petroleum company and one of the world’s top petroleum producers, controls all of the country’s oil and gas exploration, drilling, transportation and sales. Mexico’s state-owned electricity monopoly, the Federal Electricity Commission, is responsible for generating, controlling and transmitting all of the country’s electricity. Both companies are notoriously inefficient.

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