The final chapter (chapter 5) of Trade and Competitiveness in Argentina, Brazil and Chile discusses how competition policy can improve economic performance and presents a case studies for Argentina. This country has been singled out because the need for an effective competition policy had become particularly pressing during the period of the currency board when a major increase in the relative prices of the non-tradable sector occurred (see Chapter 1).
The chapter confronts the traditional rationale for competition policy based on static efficiency arguments with more recent research. The latter has shed new light on how competition policy can favour innovation, productivity and investment. Notably, market power does not necessarily result from anticompetitive behaviour, and concentrated markets may produce efficient outcomes when innovation, network effects and specialised resources such as knowledge are involved (see market structure analysis in Chapter 2). This is particularly relevant for emerging markets where high concentration ratios per se may not fulfil a necessary condition for intervention.
Although South America has legal frameworks supporting competition policy, the region suffers from the lack of institutional strength and reputation. The role of competition policy is even more important, as these countries still allow for a substantial involvement of state enterprises. In this regard, the competition agency may assist the development of deregulation, privatization, and restructuring plans that would improve the market economy. It can also fight resistance to social and economic change within government, and make room for competition and efficiency gains.
In Argentina, the largest impetus to competition and economic performance in the tradable sector has come from its rapid opening to external trade in the early 1990s. Up to 1999, competition policy in Argentina was mostly limited to resolving private claims of anti-competitive behaviour. Thereafter, competition institutions were reinforced and have been playing an increasingly active role in competition advocacy, notably in regulatory reforms of non-tradable sectors. This trend is illustrated by several case studies (electricity distribution, postal sector and telecoms, and others). Unfortunately, efforts to promote competition in the non-tradable sector came at a very late stage. During most of the 1990s, weak competition contributed to price inflation in the non-tradable sector and the latter accentuated the shock on relative prices due to the fixed exchange rate regime.
For further information contact the chapter co-author Carlos Winograd at email@example.com.
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