Slim Gets Slapped: Is Mexico Finally Confronting Its Monopolies?

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Maybe it’s because it’s Semana Santa, or Holy Week, when everyone in Mexico heads for the beach or their country homes. But the record $1 billion fine levied over the weekend against América Móvil – the mobile telephone giant controlled by the world’s richest man, Mexican billionaire Carlos Slim – hasn’t generated the buzz you’d expect south of the border. It should, however, both there and here north of the border.

Slim, whose personal fortune is estimated at just under $75 billion, is extolled by some as a market genius and excoriated by others as a Third World monopolist. To his credit, he’s stepped up his philanthropical game in recent years. He lives, however, in a country that shamelessly indulges monopolies – a Mexican tradition that conservative President Felipe Calderón vowed to dismantle when he was elected in 2006. Since then, Calderón has had little success. But the whopping billion-dollar fine against América Móvil’s Mexican subsidiary, Telcel, which was handed down last Friday by Calderón’s Federal Competition Commission (CFC) and is the largest in Mexico’s history, could be a momentum-changer for the monopoly-busting cause in Mexico.

It’s a cause Americans should care about as well. Monopolies in markets from sliced bread to cell-phone service (América Móvil, the largest cell-phone operator in Latin America, controls more than 70% of Mexico’s market) aren’t just responsible for high prices and fees in Mexico. The lack of competitive playing fields also helps choke off opportunity for small- and medium-sized businesses – enterprises that employ more than half of Mexico’s workforce. Their inability to thrive is a big reason so many Mexicans have to migrate to the U.S., usually illegally, to find adequate work (or worse, work for one of Mexico’s violent drug cartels).

The CFC nailed Telcel after a five-year investigation into the high interconnectivity fees the company charges on its network. América Móvil said it is preparing an appeal and promised to “use every one of the defense measures at our disposal.” But this isn’t the first time the CFC has sanctioned Slim’s tele-titan; the new fine is so much larger, in fact, because of previous offenses. Mexico’s Congress, meanwhile, is finally moving closer to passing a Calderon-backed law that would fine monopolies up to 10% of a guilty company’s sales. The lower house approved it this month, and it’s now up to the Senate.

For an insightful summary of the Telcel fine and Mexico’s anti-monopoly battle, read this from the Latin America’s Moment blog by Shannon O’Neil of the Council on Foreign Relations.

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