Remarks by Angel Gurría,
Competition and Regulation Forum 2017
9 January 2017, Mexico City, Mexico
(as prepared for delivery)
Dear Rector, President of the Supreme Court, Secretary of Communication and Transportation, Secretary of Economy, Ladies and Gentlemen,
It is a pleasure to be here with you to inaugurate the 2017 Forum on Competition and Regulation. I would like to thank the National Autonomous University of Mexico and the Ministry of Economy for their leadership and their commitment to bringing this Forum to fruition. I would also like to underline our long-standing cooperation with Ministry of Economy, through Minister Guajardo and Vice-Minister Rocio Ruiz, which has given fruitful results as the ones we are presenting today. I thank them for their trust.
The international economic outlook is still very complicated. The world economy has been languishing for five years now in a low-growth trap, with disappointing performances marked by annual growth rates that have stagnated at around 3%. For 2017 we expect at best a slight improvement to 3.2%. In this complicated global context, Mexico has been buffeted by a number of headwinds that have obliged the OECD to revise downwards its growth forecasts for the country, to around 2.2% for 2016, 2.3% for 2017, and 2.4% for 2018.
In the face of low growth rates and tight government budgets, it is essential to activate two of the engines that governments have available for creating more inclusive and innovative economies: fostering competition and establishing a high-quality regulatory framework. Hence the great importance of the discussions that will be taking place here in the next few days.
Competition policy is crucial for boosting productivity. Competition drives businesses to innovate and to offer better products and services, which in turn will help to strengthen and raise countries' potential for economic growth. At the same time, legal and regulatory provisions that are simple to comply with and that do not impose unnecessary burdens either on companies or on citizens will help to improve the business climate and make it fairer, while breathing new energy into the economy.
The OECD’s analyses of Product Market Regulation show clearly that economies with lower barriers to entrepreneurship and greater levels of competition will achieve higher productivity and economic growth.
In recent years, Mexico has taken some important measures to improve its competition policies and the quality of its regulation. The efforts made by both the Federal Commission on Regulatory Improvement and the Ministry of Economy have already started to bear fruit. In the OECD’s Regulatory Policy Outlook 2015, Mexico achieves one of the highest scores, together with Australia and the United Kingdom.
When it comes to competition, Mexico adopted a major constitutional reform that has served to modernise the regulatory framework. This has been reflected in the creation of new competition authorities, the establishment of new, specialised tribunals, and in the adoption of a new Law on Economic Competition. The OECD has supported these efforts to strengthen competition policies and to promote regulatory reform in Mexico. Proof of this can be found in the two reports that I have the pleasure of presenting here today - they have benefited greatly from the determination of Secretary Guajardo to promote a more productive and efficient economy in Mexico.
The first report that I want to refer to is our Review of the Resolution of Competition Matters by Tribunals of Specialised and General Jurisdiction.
The new tribunals are playing a fundamental role in instituting a specialised juridical system that offers certainty to businesses when it comes to taking investment decisions. These tribunals are also helping to improve the business climate in Mexico, and to ensure that consumers can benefit from more advantageous conditions.
The Review of Competition Tribunals offers recommendations based on international best practices, geared to strengthening these agencies by making them more independent, transparent, effective, homogeneous and predictable.
The report highlights the positive effects that can flow from the specialisation recently introduced in Mexico. For example: 1) greater efficiency as a result of repetition and standardisation of tasks; 2) greater uniformity in decisions, thanks to the concentration of all cases of a given type in a single tribunal; and 3) better quality of decision-making as a result of greater training and expertise in competition law enforcement.
The report also offers a series of recommendations designed to take maximum advantage of these changes and to strengthen them further. Some of these measures include: 1) instituting an impartial and transparent selection process for judges; 2) adopting a clear management system for reliable and transparent administration of judicial proceedings; and 3) promoting a better understanding of key economic and competition concepts on the part of judges and their staff.
This last aspect is particularly important in the context of this Forum, which will be examining substantive issues in the area of competition and regulation with a view to making them better understood not only by members of the judiciary but indeed by all the stakeholders involved. In fact, another of the recommendations in the report deals squarely with promoting forums and debates of this kind, in order to create, reinforce and maintain open channels of communication between the competition authorities, the Ministry of Economy, the sector regulators, the tribunals, the private sector, and national and international experts.
This will foster a greater sharing of experience and best practices, and will ensure that Mexico remains abreast of the latest developments worldwide in the area of competition and regulatory improvement.
The second report that we are presenting today is the “Review of Freight Transport Regulation in Mexico”, prepared jointly with the International Transport Forum.
In Mexico, as in many other countries of the OECD, the transport sector is faced with countless standards and rules that respond to different public policy objectives. For example, port activities must comply with various provisions relating to national security, health, trade, and customs matters, to cite only a few.
Moreover, the cross-cutting nature of the transport sector means that its performance impacts other sectors directly, affecting the availability, the quality and the price of products and services. Some 67% by value of Mexico's international trade is transported by road, the bulk of it crossing the United States border. Consequently, high-quality regulation of the transport sector will have a direct impact on Mexico's exports and on the growth of its economy, while faulty regulation of the transport sector will have a negative impact on economic performance.
On the basis of these considerations, and the identification of some of the main challenges facing freight transport regulation in our country, the study offers recommendations based on best international practices and on the valuable experience of Canada, Germany and Australia. These recommendations are specific to road, rail and maritime transport.
In the case of road transport, the study highlights the importance of ensuring that Mexico's regulations governing weights and dimensions are based on empirical data and on the premise that the benefits of any regulatory restriction must offset its potential costs.
When it comes to rail transport, the study concludes that the compilation of data and the analyses required to determine the conditions and tariffs of access, or in what circumstances rights of passage may be disputed, have not been carried out correctly. For example, although railway companies in Mexico must in principle supply information on the rates they charge, they rarely do so, and the railway authority lacks the instruments to enforce this obligation. Consequently, the authorities need to develop capacities for compiling and analysing the data needed to formulate judgments on competition matters.
With respect to the ports, the study indicates that infrastructure shortcomings, combined with legal controls and administrative procedures, are creating bottlenecks that obstruct the shipment of merchandise. To address these challenges, the study recommends establishing a zone free of border controls for cabotage shipping, as well as measures of administrative simplification for port operations.
Better regulation of road, rail and maritime transport will be decisive for guaranteeing more effective functioning of the market, reducing logistic and regulatory costs, and promoting more inclusive and sustainable growth in Mexico.
Ladies and Gentlemen, these are just a few of the main findings in these studies. I invite you to read them carefully and to participate actively in the discussions that will take place tomorrow in the context of this 2017 Forum on Competition and Regulation. Your viewpoints and the ideas that will emerge from these debates will be yet another contribution to making Mexico more competitive on the basis of a more level playing field. You can count on the OECD to continue moving down this road. Thank you very much.