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The following OECD assessment and recommendations summarise chapter 4 of the Economic survey of Mexico published on 4 October 2007.
Click here to read the addendum to the Economic Survey of Mexico 2007.
Further strengthening competition
Mexico has also made much progress in enhancing competition domestically; by creating pressure on firms to innovate, this will be a major source for economic growth. But in many areas, in particular network industries, more competition is needed. To this end, a number of broad issues related to competition policy and the regulatory framework should be addressed. Competition in some key sectors – such as postal services, natural gas and electricity – is still hampered by unduly restrictive regulations. Moreover, there are sectors where competition enhancing regulations are not effective or enforceable. In airports, railways and telecommunications, for instance, adequate regulations for access pricing to key facilities are required to encourage the entry of new participants or give them the ability to compete. The sector regulators do not always have sufficient authority to obtain from industry participants the information they need in order to be effective. Finally, the enforcement of competition policy and sector regulation is often hindered by time consuming litigation (amparos). Improving regulations and the enforcement of competition policy is a priority. The Federal Competition Commission (CFC) should be provided with more adequate resources and cooperation between sectoral regulations, the government and the CFC should be strengthened. Furthermore, amparo rights should be reviewed and specialised courts with economic expertise should be created. The government is considering undertaking a review of existing laws and regulations to eliminate unnecessary restraints of competition. The experience of other countries, such as the broad competition policy review conducted in Australia over a period of several years, suggests that such a comprehensive review is an important step to promote competition, a key driver of economic growth. The OECD Competition Assessment Toolkit can provide a framework for this exercise.
Enhancing transport infrastructure
The efficiency, quality and price of transportation are important factors influencing the cost-competitiveness of Mexican firms, the attractiveness of the country to foreign investors, and consequently Mexico’s productivity growth. The road network and trucking are plagued by inefficiencies and there are border issues that need to be addressed. The government is committed to further developing road infrastructure through public-private partnerships and concessions for toll roads. Clarifying long term government plans would help private sector involvement. Scarce public resources should be invested in areas that are less attractive to private investors, but may be economically justifiable to facilitate inter and intra state commerce, as well as better integrate remote rural areas. To further promote trade with the large US market, an agreement for a pilot project on the US Mexico cross-border trucking was signed in February 2007, and it needs to be implemented. In railways, past privatisation has led to productivity gains, lower prices and quality increases, but disputes between private concession holders over trackage rights have prevented the nationwide development of traffic and interlinear transport across the whole network. Stronger regulations are required for setting trackage and interconnection prices. Measures to improve port efficiency are also needed as this would bring large benefits in terms of trade flow increases.
Imposing effective competition in telecommunications
There is scope to impose effective competition in the telecommunication networks with a view to further reduce prices and improve the quality of services. Despite large reductions in telephone charges, Mexico remains one of the OECD countries with the highest charges, especially for business use. In the mobile telephone market, in particular, the dominant firm is using its market power to squeeze out other players. The government is committed to increasing effective competition. Essential measures include improving mandatory access to the local loop (which is important for broadband development), regulating fixed to mobile termination charges and introducing mandatory roaming for smaller mobile companies to use the largest firm’s network at a regulated price. The sectoral regulator, COFETEL, needs greater independence from leading companies in the sector. It should be given by law the power to set access prices to the local loop and other key network facilities. COFETEL should be held accountable to the government for the design and implementation of access pricing rules that are pro-competition. Clarity in the law and regulations is of prime importance to reduce the scope for excessive use of amparo proceedings, which have frequently inhibited enforcement.
Telephone charges in the OECD
In US$ (PPPs), August 2006
1. Excluding VAT.
2. Including VAT.
Source: OECD, Communications Outlook database
Restructuring the electricity sector
It would be appropriate to engage in a process of restructuring of the electricity sector, to improve its efficiency and the competitiveness of the economy as a whole, while at the same time strengthening incentives for generation and transmission investment so as to keep pace with projected demand over the medium term. The objective is to provide businesses with an increasing and reliable supply of lower-cost energy. Some useful steps can be taken to promote efficiency in the state owned companies within the current constitutional constraints. In particular, clear separation of the generation from the transmission company should be carried-out. An electricity market should be set up and it should be run by a system operator working as an independent entity from the dominant state-owned company, CFE. To further improve investment incentives and efficiency, consideration will have to be given to changing the legislation at some point to allow private investors to sell power directly in the wholesale market.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.
Una versión para imprimir de la síntesis en Español, en formato pdf, también puede ser descargada. Esta incluye la “Evaluación y recomendaciones” de la OCDE, pero no incluye todas las figuras que aparecen en las paginas anteriores.
The complete edition of the Economic survey of Mexico 2007 is available from:
For further information please contact the Mexico Desk at the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by Bénédicte Larre, David Haugh and Bruno Rocha under the supervision of Stefano Scarpetta. Research assistance was provided by Roselyne Jamin.