Democracy in Mexico has failed to dismantle the gigantic inheritors of crony capitalism that were born during seven decades of authoritarian rule. One or two big companies dominate almost every market in the country—from the paint industry to broadcasting and mobile telecommunications. Where privatization and market regulation does not benefit a well-connected entrepreneur, the state itself runs the monopoly—as in the energy sector through PEMEX or the CFE (Comisión Federal de Electricidad, or Federal Commission of Electricity).
It is estimated that in 30 percent of the economy, consumers pay prices that are, on average, 40 percent higher than those in competitive markets. This reality hits harder on people with low incomes. The limited number of suppliers of telephone and Internet services, as well as the barriers to entry for new players, increases prices by more than 30 percent. In the pharmaceutical sector, the impact on prices goes up to 40 percent. Prices for dairy products are estimated to be 18 percent higher than they would be with greater competition.
Consumers, small- and medium-size enterprises, and government authorities are trying to open access to these traditionally closed markets. Last year, Cristina Massa joined the fight against monopolies as the first female regulator to serve as commissioner of the Comisión Federal de Competencia (Federal Competition Commission—CFC). What she and her colleagues do in the foreseeable future will determine the competitiveness of Mexican economy.
I spoke with her in the Condesa neighborhood of Mexico City; she talked fast but eloquently. Her direct and transparent manner is a sharp contrast to the markets she is regulating, where secrecy, ambition and predatory commercial tactics are daily fare. As a young woman, Massa is a fresh face of Mexican bureaucracy. She holds a graduate degree from Harvard Law School and worked in capital markets law before starting a career in the public service.
She told me that she is conscious of dealing with “groups who believe themselves to be untouchable.” In her opinion, the existence of powerful interest groups is common to other areas in the economic, political and social arenas where she has worked before. However, in antitrust policy there is also “a highly technical component which provides tools and instruments to overcome many difficulties.”
She knows her job entails a David-versus-Goliath element, but doesn’t seem intimidated. Instead, she is optimistic about the new powers the Commission received during the last amendment to the Federal Competition Law in 2011—which she lobbied for. “Competition policy, as any policy, is influenced by politics,” Massa says, “and the Commission must be aware of the context in which their decisions are made in order to enforce the law in a more effective way […] it is not that decisions should be made on the basis of political interests, but we need to understand the political challenges our decisions will face.” Massa understands that the CFC already faces too many opponents, and cannot afford to create new ones.
In Mexico, she told me “there is a particular challenge for the state. It is not only that dominant companies are more influential than citizens; they sometimes are even more powerful than the government, which suffers from tremendous institutional weakness. There is a serious lack of antitrust specialists in the judiciary, and a scandalous scarcity of financial and human resources in the Commission.” This and the fact that investigating monopolistic practices is painfully long explains why the Commission is still solving cases that were initiated five or more years ago.
“The Commission faces a judicial system that frequently favors private commercial interests over those actions of the state representing consumers,” Massa notes, adding, “There is a lack of training on antitrust policy and huge pressure on commissioners to vote accordingly to the interest of big companies.”
When asked if anyone has attempted to bribe her, she denied: “I have not heard of any cases of corruption involving present or past commissioners, but [companies] exert pressure through media.” In addition, some companies have gone as far as taking legal action against commissioners in cases that could ultimately put them in jail. That is why they have to be very careful in what they say to the press.
For example, on May 3, Eduardo Pérez Motta, president of the CFC until 2013, did not participate in a ruling because he made an imprudent statement that was used against him by the defendant. Massa and her three remaining colleagues then went ahead to vote on whether to sustain or halt a $1 billion fine against Telcel, which holds 70 percent of the Mexican mobile phone market. The fine was finally substituted for Telcel’s compromise to reducing interconnection tariffs in the benefit of consumers and competitors.
Speaking in a less optimistic and slower pace, Massa says, “The major challenge for competition policy is a cultural one. People in Mexico are not used to competitive markets after a long history of state intervention to organize the economy. They do not know the benefits of competition or that there is a legal framework to achieve them. Even authorities in lower levels of government sometimes encourage monopolistic practices, trying to have orderly markets. It is a problem of ignorance.”
Massa’s arrival to the Commission breathes new air into the battle against Mexico’s monopolies. Her knowledge of the law and politics will probably improve the effectiveness of the CFC’s resolutions. The challenge, however, is to integrate civil society by going public with the debate about competition. By understanding this, Cristina Massa might trigger the dismantling of monopolies, the greatest obstacle to growth in Mexico’s economy.
Edgar Moreno is a guest blogger to AQ Online. He is a graduate student of public administration at Columbia University. Edgar has served as chief speechwriter in Mexico’s Ministry of the Economy and a speechwriter to the President of Mexico.