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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.

April 16, 2006|Marla Dickerson | Times Staff Writer

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.

But in another arena in which they can wield their votes -- with their pocketbooks -- Mexicans continue to be frustrated by a lack of true choice.

Placing a call? For the minority of Mexicans who can afford a phone, their service comes from a telecom group that controls 94% of land lines and 80% of cellular service, charging rates that are among the highest in the world.

Watching TV? Two behemoths own 94% of Mexico's television stations, and recent legislation probably only served to strengthen their grip.

Buying a beer? Whatever the brand, chances are it was brewed by one of two companies whose combined share of the market tops 99%.

With a presidential election coming in July, Mexicans are debating the merits of three major candidates and a host of minor ones vying to succeed Vicente Fox, who is prevented by law from seeking another term.

But analysts and scholars of Mexican business say the country's oligopolies and monopolies, in both the private and public sectors, may prove tougher to dislodge than the Institutional Revolutionary Party, or PRI, which for decades ran things until Fox of the National Action Party was elected president in 2000.

"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.

Mexico's media leviathan, Grupo Televisa, and runner-up TV Azteca, which combined garner nearly every peso spent on television advertising in the country, pushed hard to win approval of legislation last month that granted them additional broadcasting spectrum to help them convert to digital services. The rub, critics note: Nothing in the legislation expressly requires that they pay for it.

Televisa and TV Azteca used their news broadcasts to stump for the law. Mexico's Congress approved the measure handily amid widespread public protests and allegations that lawmakers consented in exchange for bribes and positive news coverage of their parties' presidential candidates during the campaign.

The broadcasters and legislators denied any backroom deals, but many Mexicans weren't convinced. An angry mob roughed up a key Senate leader after the vote. Critics said the law amounted to a giveaway of public assets worth billions of dollars that also would block new players from the market.

Lawmakers caved in to "the vested interests that are the main obstacles to modernization of the Mexican economy," said Mexico City-based political scientist and newspaper columnist Denise Dresser.

Televisa and TV Azteca "used a public concession to defend a private economic interest," Dresser said. "You basically have an economic monopoly determining the rules of the game."

Moguls in other sectors are flexing their political muscle as well.

Mexican trade officials recently succeeded in opening the U.S. market to more imports of Mexican cement, a move that could lower costs for American home builders. But the government hasn't been as considerate of consumers in its own country, who have long complained of inflated prices. At the behest of Cemex, which controls more than half the market here, Mexican officials last year turned away a cargo ship loaded with 26,000 tons of Russian cement.

In the beer industry, Grupo Modelo and Cerveceria Cuauhtemoc Moctezuma, whose brands dominate the Mexican market, supported a new environmental tax on nonreturnable beer bottles that falls heaviest on imports. Importers lack the collection network of domestic giants and therefore sell such nonreturnable bottles.

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.

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