Monopolies 'scamming' Mexican voters

World's richest man Carlos Slim owns much of Mexico’s communications industry, and critics say he is hurting consumers.

    Monopolies 'scamming' Mexican voters
    Carlos Monroy is angry about Mexican monopolies, yet complaints face a hostile reception [Chris Arsenault/Al Jazeera]

    Mexico City, Mexico -
    Compared with more than 50,000 dead bodies as a result of drug violence, Carlos Monroy's sky-high mobile phone bill might not seem like a big deal.
    But monopolies or oligopolies in telecommunications, food processing, energy, alcohol, television and other sectors are holding back Mexico's growth, according analysts and consumers.
    "For young people, the telephone system is the worst monopoly," Monroy, a political student in Mexico City told Al Jazeera. "The internet is slow compared to how much you pay, and the service is terrible." 
    He realised Mexicans were getting what he called "an unfair deal" during a student exchange in France, where consumers were offered far better service and faster internet for similar costs.
    Telmex, which holds the majority of landlines, and its corporate cousin Telcel, are both owned by Carlos Slim, the world's richest man according to Forbes magazine. Telcel controls about 70 per cent of Mexico's mobile phone market and Telmex has more than 80 per cent dominance for fixed line telephone services.

    'Over-charged for service'
    Monroy is not alone in his desire for change. In January 2012, the Organisation for Economic Cooperation and Development (OECD) released a report on Mexico's communication sector, concluding that consumers were being over-charged by $13.4bn a year for phone and internet services. 
    "The welfare loss attributed to the dysfunctional Mexican telecommunication sector is estimated at $129.2bn (between 2005 and 2009) or 1.8 per cent GDP per annum," the report said. Mexico also has "the highest monthly subscription costs for basic broadband internet connections and the slowest advertised download speeds".
    Telmex and its owner, perhaps unsurprisingly, dispute the OECD's conclusions. "If we cover 70 per cent of the market, it means that there is 30 per cent left for competition," said Carlos Slim, president of Telcel, after the report's release. He also criticised the OECD's figures, claiming they were outdated.
    Juan Pardinas, president of the Mexican Institute for Competitiveness, a pro-business think-tank, worries that monopolies are hurting small companies and their ability to expand overseas. 
    "From personal experience … international roaming rates [for cell phones] are far higher for Mexican consumers compared with neighbouring countries," he told Al Jazeera. 
    "My biggest concerns are when regulation creates advantages for some players in the market over others … it affects innovation," Pardinas said, adding that Telmex is in a unique position because it has had to invest in rural landlines, a business with high costs and low profits that its competitors did not want. 
    Election issue?

    "From personal experience … international roaming rates [for cell phones] are far higher for Mexican consumers compared with neighbouring countries ... it affects innovation."

    - Juan Pardinas, Mexican Institute for Competitiveness

    Mexicans are growing increasingly frustrated with monopolies, often owned by politically connected and extremely wealthy individuals, analysts say. The problem became a campaign issue during the lead up to a presidential vote on July 1. In the monopoly debate, however, candidates did not offer specific plans on how the situation could be addressed.

    Andres Manuel Lopez Obrador from the left-leaning Party of the Democratic Revolution (PRD) and Josefina Vazquez Mota, representing the conservative National Action Party (PAN) "have mentioned the issue in an abstract way", Pardinas said. 
    "But that’s still a dramatic change from [the last presidential election] six years ago", when the problem was completely absent from the agenda.
    In May of this year, Mexicos anti-trust regulator dropped a fine of nearly $1bn against Telcel's parent company, America Movil, for unfair practices. As part of the settlement, Telcel agreed to accept lower fees for calls placed by mobile phone users from other companies onto its network.
    The Federal Competition Commission's decision not to impose a tough fine was seen by some analysts as caving to Carlos Slim's political power. 
    "Regulators in Mexico are not really autonomous," Ben Cokelet, executive director of PODER, a watchdog group based in Mexico City, told Al Jazeera. "There needs to be greater transparency in these [large corporate] boardrooms. Even using the insufficient standards of the SEC [Securities and Exchange Commission in the US] would be helpful." 
    TV Azteca, one of Mexico’s two dominant networks, was listed on the New York Stock Exchange until it suspended trading a few years ago, Cokelet said, because the SEC insisted on greater transparency.
    Given recent problems related to openness and accountability in the US financial sector, it may seem worrying that campaigners consider SEC standards a major improvement for Mexico's large corporations.
    The situation with monopolies is slowly improving, Paradis said, as average people are paying more attention and could take their frustrations into the voting booth. But other analysts aren't so sure. 
    "Monopolies have always been a political theme, rather than an economic one, as they are prohibited by the constitution," Raul Trejo, a media expert at the National Autonomous University in Mexico City (UNAM) and monopoly critic, told Al Jazeera. "Nonetheless, certain groups managed to gain control over whole sectors."
    Televisa, Mexico’s largest TV station has an audience share of more than 60 per cent, Trejo said. 
    Buying Bimbo bread

    Mexican left hoping for resurgence

    The problem isn't just digital. Despite the fact that up to half of the country lives below the poverty line, Mexicans pay among the highest prices for bread and cereals in the 34-nation OECD.
    Bimbo, a Mexican multinational, controls most bread sales and food group Maseca commands about 70 per cent of the market for corn flower, a staple food used to make Mexico's ever-popular tortillas. 
    "If you want bread, you almost have to buy Bimbo," Viveka Gonzalez Duncan, an art history student at the Iberoamerican University, told Al Jazeera. "I think we need more competition, if you are paying for a service and a company isn't providing it, then you need to be able to go somewhere else."
    The most powerful monopolies are products of privitisation in the 1980s and 1990s, said Monroy, the political science student. "It's like what happened with the ex-Soviet countries - the problem is not the free-market, the problem is with politicians favouring their friends", when assets such as the phone company were privatised. 
    Carlos Slim was given a six-year window to operate Telmex and, after that, he had the market on lock-down. 
    Media monopoly
    Throughout the election campaign, which formally ended on Wednesday due to local voting laws, critics complained that Enrique Pena Nieto, the presidential candidate from the Institutional Revolutionary Party (PRI) received undue support from Televisa and TV Azteca, the dominant news broadcasters.
    The Guardian newspaper recently exposed memos showing that the PRI had been paying Televisa for coverage, while WikiLeaks documents from 2009 said: "It is widely accepted … that television monopoly Televisa backs the governor [current PRI candidate Pena Nieto] and provides him with an extraordinary amount of airtime and other coverage." 
    The PRI campaign denies these charges and Televisa has criticised the Guardian's reporting. 
    "Some people say that Pena Nieto was created by Televisa, but that's wrong," Trejo, the media studies expert, explained. "He was their best customer, buying a lot of space when he was governor of Mexico State." 
    There is nothing unique about politicians purchasing advertising space. And, for better or worse, close relations between political and media elites happen from Fleet Street, the heart of London's newspaper industry, through to the National Press Club in Washington - not to mention what goes on in Beijing or Moscow. The difference in Mexico is the concentration of market share and wealth, critics say. 
    "Forty men control [about] 45 per cent of Mexico's GDP," campaigner Cokelet said. That figure couldn't be independently confirmed by Al Jazeera, and sounds outlandish on first reading, but considering Carlos Slim alone has a net worth of $69bn and controls eight per cent of Mexico's GDP, such levels of plutocracy are not outside the realms of possibility.
    As one of the world's most unequal societies in terms of wealth distribution, perhaps it is not surprising that Mexican elites have market dominance in their respective fields.
    This might be changing, however, at least in the realm of media and telecommunications, due to the advent of new technologies. "A certain segement of the population, the middle class, has access to different sources of information" due to the internet, said Trejo. "This contributes to political plurality." 
    The student movement #yosoy132 has taken to the web to criticise Televisa and TV Azteca for "biased election coverage". Their rebellious tweets, however, are likely being transmitted by the very same network connections controlled by Carlos Slim's monopoly.

    Follow Chris Arsenault on Twitter: @AJEchris

    SOURCE: Al Jazeera



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