Gringo Lost

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NY Times blogs on Mexico’s monopoly woes

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And a thank you to the New York Times for publishing this blog post about Mexico’s trouble with monopolistic type firms in its oil and telecommunications industries. It is especially redeeming for the NYT that they published the post despite the fact that Carlos Slim (owner of basically all of Mexico’s telecom industry) is now a major stockholder of the NYT Company.

In the blog, a World Bank Report called No Growth Without Equity (pdf) is cited which states much of the blame for Mexico’s lackluster GDP growth (~3%) is on its particular form of nationalist-capitalism that places large industries in the hands of singular firms, in an effort to keep out foreign competition. While there may be economic benefits in keeping the petrol-economy located in the hands of one firm (PeMex) – *and that could be argued. There is definitely no benefit in keeping information technology, internet, and communication services concentrated in one firm. As is the case in Mexico with Telemex.

The report makes many points about Mexico’s telecom industry. Here are only some of the indictments against Telemex:

  • Authorized by the Ministry of Communications and Transport, Telemex is allowed to bill the costs of a local call to all international calls. In essence, doubling the billing costs. (In addition, this charge was implemented in an opaque manner which hindered many users from even knowing that the charge existed)
  • Telemex is allowed to charge per minute, and round up on all minutes used per phone call.
  • Telemex’s links with government have helped block competition from other firms that could provide Wi-fi, digital subscriber line (DSL), and VoIP communications.
  • When Telemex was privatized in 1990, it was given a significant reduction in its tax rate and protected from competition for six years.

Being in Mexico and actually working with a IT-based organization, I am beginning to see how the telecom industry in Mexico is severly hampered by lack of competition. There is a lack of broadband infrastructure throughout the city. Estimates are that 66% of the city doesn’t know how to use the internet. To make a local pay phone-call costs me more than $1 for 5 minutes. Broadband access costs over USD $18 per Mbps, which is over 6x more than the US pays (which if you take into account income differences, it’s really more than 6x). And the lists goes on and on…


Written by gringolost

June 3, 2009 at 6:14 am

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