Monday , September 26 2022

Seven corporations that impose prices on the state, but for the government "are not monopolies"


América Móvil, Bimbo, Cementos Mexicanos, Coca-Cola Femsa, Grupo Mexico, Gruma and Televisa dominate their markets all over the country. Most of them do not make them monopolies; Although this may indicate healthy competitive risks due to the possibility that they have market conditions.

In the management of Enrique Peña Nieto, these companies have not been investigated for absolute monopolistic practices, according to the public file of the Federal Commission of Economic Competition (Coface). But their size makes them potential agents of relatively monopolistic practices, according to Dr. Cesar Armando Salazar of the Institute for Economic Research of the Autonomous National University of Mexico (UNAM).

According to the researcher, these companies are "monopolies in their mode of operation," because they have the potential to monopolize the production of a specific product or service, which involves imposing possible barriers, uprooting competition and / or setting prices.

Monopolies limit supply and demand. In this way, they determine the markets by controlling the competition and prices of goods and services, confirming what is stipulated in the provisions of the Federal Law of Economic Competition.

According to the regulations in effect from 2014, the difference between absolute monopolistic practices and relative monopoly relations is that the former is related to an agreement between the main competitors of a particular activity, to limit, control and enjoy the exclusive use of the market. The latter, however, implies the ability of one or several competing monopoly market.

However, Dr. Salazar said, "The main ingredient we identify a monopoly is that it has the ability to impose a price."

An example was the "unjustified" 27% rise in cement prices that took place between January and June last year.

The "cement war" – as it was called – ended almost two months after CMAX broke up relations with the National Bureau of Construction (CMIC) and after a business agreement, to maintain competitive prices within the framework of a "value strategy".

Although the National Chamber of Housing Industry Development Housing (Canadevi) accused Cemex of raising prices discretionally, the cement company was not approved by the competent authorities.

For Salazar, Cemex was able to raise cement prices "because of its market power," in addition to its "aggressive" pricing policy in Mexico, its main market, after "major financial problems" of debt.

Another indicator of monopolistic practices – the economist said – is the difference between the reserve price of a good or service (which is the maximum amount the customer is willing to pay) and the real price of the product (what the consumer pays). ).

The pope, for example, stated at the beginning of October this year that the lack of competition and monopolies in the market are causing Mexican households to pay a premium of up to 98.23 percent when they consume end products – corn chips, bread, meat, eggs, dairy products, fruits, vegetables , Non-alcoholic beverages, medicines and construction materials – and services such as transport of foreign passengers.

In this context, the committee concluded that "for markets with lower elasticity, when companies with market power are more likely to expect higher prices than in highly flexible markets or when there are no companies with market power."

The Great Consulate

Unlike other countries, Dr. Cesar Armando Salazar of UNAM said in an interview that the Mexican government does not require large corporations, which may be relatively monopolistic or absolute practices because of their size, but alternatively, economic competition.

An example of this is a reduction in the degree of concentration in the mobile telephony services market in Mexico due to the increase in competition. Between 2013 and 2018, according to data from the Federal Institute of Communications (IFT), América Móvil's competition quadrupled (from 4 to 16 companies) and its presence in the industry dropped from 69% to 64%.

Although improving competition is essential for economic development, measures that are not accompanied by better and more effective regulations and sanctions to balance the market, "do not necessarily limit monopolistic activity or behavior."

Salazar explained that "when there is no real competition forcing large monopolies to try to improve consumption conditions," there will always be procedures for imposing conditions.

The researcher recalled what happened in the banking sector, where the opening of foreign investment – since 1994 – led to the monopoly of foreigners who currently control 70% of the payment system. Negative impact, the Mexican banks have "very high" fees, according to research UNAM "Foreign banks in Mexico: diversification of activities and their impact on income structure" (2014).

In this regard, the priority of companies such as América Móvil, Bimbo, Cementos Mexicanos, Coca-Cola Femsa, Grupo Mexico, Gruma and Televisa – to mention a few – implies risks to healthy economic competition.

These seven companies have had considerable economic growth in recent years. Although the net profits (or real earnings) of some of them were lower between 2014 and 2017 – as in the case of América Móvil and Televisa – their book value (or net worth) is on the rise.

At that time, the real value of Gruma was eight times higher (803 percent). In contrast, Grupo Mexico grew by 55.4%, followed by Bimbo (43), Cemex (37), Televisa (30), Coca-Cola Pamesa (16) and America Mobil (5.3%).

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