News, Insights and Best Practices for Manufacturing in Mexico

Mexican president begins to break up oligopolies and economy responds

31 Mar 2014

Category: Labor & Economics

Mexican President Enrique Peña Nieto has made it his initiative to get rid of the Mexican industrial groups that are harming the economy in his country. The first thing he did as part of this mission, according to the Economist, was to open up the Mexican oil and gas sector to outside investors. This happened with the full support of the previous state-owned oil and gas firm, Pemex, according to Law 360. Pemex CEO Emilio Lozoya said at the latest CERAWeek (Cambridge Energy Research Associates) energy conference that his company would work with foreign companies and that he was making sure that Pemex would change its structure to support the end of Mexico's state-controlled oil monopoly.

But Nieto has done more than simply end the Pemex monopoly. He has begun going after the telecommunications sector, which, like in the U.S., is dominated by a handful of large corporations. According to the Economist, América Móvil, owned by one of the richest men in the world, Carlos Slim, has 70 percent of all mobile subscribers and 80 percent of landline phones. He also charges more than the market would likely price the product if it were left to open competition in a free-market economy. Televisa, a Mexican television company, owns 70 percent of Mexican cable television subscriptions.

In order to break these large conglomerates, Nieto is creating more regulations to force the companies to charge fair prices, and he is also making laws that will support smaller companies and allow them to grow.

Markets are responding
During Lozoya's speech about the Mexican government's decision to open oil and gas to free trade, he explained that "Mexican society wants change."

Right now, Mexico's economic surge might be a positive response to the changes that Nieto is bringing to the country. In February, Mexican exports increased dramatically, rising by more than in the past four years, according to Reuters. The source cited this as an example that Mexico's recovery from its lackluster 2013 performance is getting stronger.

Exports of automotives rose by 12.21 percent, which is the biggest growth since July 2011. Non-oil exports as a whole rose by 5.07 percent, which is the fastest growth since October of 2009.

Mexico exports about 80 percent of its products to the U.S., which saw weak manufacturing numbers because of the severe weather.

Mexico has a $431 million trade surplus. It is a country that is growing stronger and exporting more. U.S. companies need to take advantage of expanding to Mexico through an offshore shelter company.

 

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