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"Mexico's New Labor Law Reform"
Ricardo Castro-Garza

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LATIN AMERICA: "GOING GLOBAL: The 2012 Investor’s Guide to Mexico’s Business and Technology Services

LATIN AMERICA: "GOING GLOBAL: The 2012 Investor’s Guide to Mexico’s Business and Technology Services" report. 39-page report by NearshoreAmericas.com.

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Monopolies hold back Mexico's economy with high prices, poor service

Enter a store in Mexico, and you're likely to find only two brands of fresh milk, Lala and Alpura. The two companies control the market. The same goes for beer. Two conglomerates have a lock.

In fresh bread, most brands belong to Bimbo, a massive company.

Pick up the cellphone on the way home, and you'll probably be enriching the world's wealthiest man, Carlos Slim Helu, who controls Telcel, Mexico's biggest cellular network. Another company Slim owns, Telmex, operates nearly all of Mexico's fixed-line telephones.

Mexico is a country of concentrated economic power, and in some cases outright monopolies. It's an arrangement that limits Mexico's hopes of a thriving economy, chokes its consumers, discourages competition and prevents better products and services from emerging in the marketplace. It's been this way for decades, and analysts caution against expecting change anytime soon.

Don't expect a serious debate about it on the television news, either. Two networks control 97 percent of the country's television viewership and even more of the advertising revenue it generates.

The impact - on Mexico and, by limiting that country's growth, on the United States - is huge. Mexico's chief anti-trust official, Eduardo Perez Motta, says poor Mexicans pay as much as 40 percent more than they should for basic goods and services because of monopolistic practices. It also hobbles the economy. Greater competition, economists say, would lower prices, create stronger companies and accelerate growth, lifting the nation more quickly.

Yet it's a topic that rarely has come up in the political campaign that culminates July 1 with the election of a new president, who'll serve a six-year term starting Dec. 1. Neither the likely winner, Enrique Pena Nieto of the Institutional Revolutionary Party, nor the candidate of the ruling National Action Party, Josefina Vazquez Mota, has raised the issue in campaign appearances. Andres Manuel Lopez Obrador, of the leftist Democratic Revolutionary Party, has campaigned against monopolies, but he's largely confined his criticism to Telmex, and, oddly, the U.S. retailer Wal-Mart.

Experts blame Mexico's business environment squarely on the country's political system, where politicians do the bidding of tycoons, government doesn't regulate the businesses it can, and favoritism and negotiation when it comes to applying the law is the norm.

"The problem of monopolies in Mexico, epitomized by Carlos Slim, is not a problem of businessmen. It's a problem of government," said Eduardo Garcia, a veteran Slim watcher and the director of the financial website Sentido Comun, or Common Sense. "If you and I were running these companies and saw the weaknesses of the state, we'd do it, too."

Nor is it a problem just of private companies. The state also has monopolies. All gas stations in Mexico carry the green, white and red logo of Pemex, the state oil company. All electricity comes from a state utility, which gives subsidized rates to the poor but charges among the highest rates in the Western Hemisphere for the rest. Even then, the inefficient utility requires a steady stream of government cash to keep operating.

"There's no reason for it to be a public monopoly," said Ernesto M. Flores-Roux, a University of Chicago-trained statistician who works at Mexico's Center for Research and Teaching in Economics, a research center. "It's not like oil, where there's this nationalist argument."

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Source: Miami Herald - GAI

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