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Mexico needs to be freed from unhealthy monopolies

Mexico needs to be freed from unhealthy monopolies By Jorge CastañedaPublished: February 4 2007 21:39 | Last updated: February 4 2007 Felipe Calderón, Mexico’s new president, kicked off his domestic policy agenda by launching military campaigns against drug lords and violence in Michoacán and along the US border, in Tijuana. The winner of last year’s election – if only by a hair-thin margin – wanted to show he meant business with a tough, even strident law and order approach. His first foreign policy initiative was a successful swing through western Europe. He used the trip to disassociate himself clearly from worrisome trends in other Latin American countries and to convince European political and business leaders that Mexico is not hopelessly mired in protest, corruption and violence.The stereotype is not quite accurate. In fact, 12 straight years of macro¬economic stability, democratic elections, respect for human rights and a more outward-looking foreign policy have transformed Mexico, its people and its view of the world. The middle class has expanded, institutions work (albeit imperfectly), the media are free, sometimes outrageously so, and more Mexicans than ever acknowledge their welfare is largely linked to the US.So why, in spite of Mr Calderón’s generally good reception, is the prevalent view of Mexico – niceties aside – still one of doom and gloom? There are many explanations, but one trumps all others: the economy’s mediocre growth over the past 12 years. Under former President Vicente Fox, average economic growth barely reached 2.5 per cent; just before, under Ernesto Zedillo, it averaged slightly more than 3 per cent. This is less than half the region’s average over the last three years. It is well below Mexico’s performance between 1940 and 1980 and insufficient to tackle poverty, unemployment, violence and migration.The question then becomes why there has been such meagre growth and what can be done about it? After years of debate, a consensus is forming that includes The Economist and the defeated populist candidate Lopez Obrador, the World Bank and Central Bank, the political left and right.The thesis is simple. Under former President Carlos Salinas, Mexico opened its economy; under Mr Zedillo, it adopted representative democracy; under Mr Fox, the 70-year reign of the Institutional Revolutionary Party (PRI) came to an end. But the old corporatist system, founded in the 1930s, has survived all these changes intact.The monopolist control of practically every walk of Mexican life is in place; indeed, it may be stronger than ever. Therein lies Mr Calderón’s – and Mexico’s – challenge. Huge monopolies, both public and private, dominate the country. Pemex and CFE have exclusive rights on oil and electric power; Telmex has virtually the same in the fixed and mobile phone business, Cemex on cement, Televisa and TV Azteca in television, Bimbo in bread and Maseca in tortilla production. Two banks, Citigroup/Banamex and BBVA/Bancomer control nearly 80 per cent of total deposits; Wal-Mart has already become Mexico’s biggest employer and is rapidly displacing traditional retailers; the National Social Security Institute provides almost half of all health services.But that is not all. The country’s labour unions – thanks to the closed shop, mandatory, unsupervised dues and sweetheart deals with government and business since the late 1940s – enjoy a complete monopoly on hiring, firing and collective bargaining, exerting enormous influence on the oil company, electric power, healthcare – and most importantly – education. The 1.2m member National Teachers Union is the biggest in Latin America and the most powerful in Mexico; it is accountable to no one, except its unquestioned leadership.Lastly, but just as importantly, Mexico’s three main political parties have a lock on electoral participation. Independent, or write-in candidacies are not allowed. Creating a new party is only possible for those willing to enter into the shady, complicit and corrupt practices of the existing ones.The task ahead is self-evident: boldly introduce competition everywhere, pry open and democratise the unions, regulate strongly and independently and courageously break up the nation’s emblematic Standard Oils and AT&Ts.Is Mr Calderón up to it? So far, he has talked the talk, but remained non-committal in practice. His first decision is imminent: to authorise a third, national television network not limited to cable that General Electric’s NBC division is fighting for. It would be just one step, but a crucial one, in a direction that Mexico has never travelled.The writer, Mexico’s foreign minister from 2000 to 2003, is a professor at New York UniversityCopyright The Financial Times Limited 2007

4 febrero, 2007

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