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Mexico's Road To Economic Sanity

Author: Shannon K. O'Neil, Nelson and David Rockefeller Senior Fellow for Latin America Studies and Director of the Civil Society, Markets, and Democracy Program
March 15, 2013
Fortune Magazine


FORTUNE -- With a bill introduced by the president, and backed by all three political parties, Mexico is poised to take on a few of the country's biggest monopolies and moguls. But for Mexico to truly engage in economic competition, it needs to do much more.

A lack of competition pervades the Mexican economy, as one or a few companies dominate sectors as diverse as glass, cement, flour, soft drinks, sugar, and tortilla flour, not to mention the state's control of energy and electricity. This hits consumers' bottom lines -- an OECD study estimates that it increases the costs of basic goods for households by some 40%. It hurts Mexico's working and middle classes the most, as they must spend a larger proportion of what they earn on these goods and services. It also hits the burgeoning manufacturing sector, which has to pay more for raw materials and basic inputs.

Few question the need to reform telecommunications and broadcasting, as the dominance of a few companies has hurt Mexico's broader economy and, at times, warped its politics. Consumers and businesses alike pay far more for their phone calls than the OECD average (over 30% and 80%, respectively), even though Mexico's telecom investment lags all other OECD countries. And Mexico trails not just China or Russia, but even Bosnia in broadband access.

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