Mexican President Enrique Pena Nieto changes that Mexico’s economy desperately needs. (AP Photo/Dario Lopez-Mills)
Mexico’s president Enrique Pena Nieto, who assumed office in December 2012, is pushing through a major package of reforms targeting some of the country’s most powerful economic interests, including those in the telecommunications and energy sectors. CFR’s Shannon O’Neil says “these are changes that Mexico’s economy desperately needs,” even if only some of the measures take hold. Successful reforms could significantly improve the country’s image, she says, especially in the eyes of international investors asking: “Is Mexico for real this time.” Meanwhile, she notes that while economic ties between Mexico and the United States are already strong, Washington should leverage this moment as an opportunity to expand bilateral trade further.
President Pena Nieto’s economic reforms are targeting the big empires of the country’s telecommunications sector. Can you give some background on the industry? What is his goal in this sector?
For the last twenty plus years, Mexico’s telecommunications industry has been basically in the hands of Carlos Slim. Whether it’s Telmex, which is fixed line, or Telcel, which is mobile, his companies have controlled 70 to 80 percent of the market. By all independent accounts, this has had huge costs for Mexico’s economy, particularly for consumers and businesses, which pay much higher rates for their telephony needs.
The other big cost is underinvestment in the telecoms sector. When you look at Mexico vis-à-vis other OECD countries, as well as its emerging market peers—China or Korea or Brazil—Mexico falls behind in telecom infrastructure investment. This includes new types of connections, such as Internet and broadband. Indeed, by some measures, the country even falls behind places likes Zimbabwe and Serbia. That lack of access to the digital age has real costs for businesses and innovation.
The Televisa broadcaster is another one of the empires being targeted by these economic reforms.
Broadcast is another sector that Mexicans in general have been worried about. There is a duopoly in broadcast between Televisa, which has about 70 percent of the market, and TV Azteca, which takes the remaining 30 percent. Like many countries, the vast majority of Mexicans get their news from television, not from print media or radio, where you see more competition and plurality.
So what [officials] say they’re going to do is auction off at least two new networks on the spectrum; in those auctions, neither of these existing companies can bid. So this is another opening up. There’s also been talk of creating another public channel, i.e., a government channel.
The head of Mexico’s teachers’ union, Elba Esther Gordillo, was recently arrested on embezzlement charges. What’s the significance of this in light of these other economic reforms?
Before her arrest, the congress passed a constitutional measure that would reform the education system and do things like subject teachers to performance tests. She had been politically opposed to that and some of these other proposed accountability measures. Additionally, most people believed she was corrupt—she’s been photographed for years wearing very, very nice clothes and has houses that people have talked about. There was always a question about how she could afford all these Hermes bags on a supposed $80,000-90,000 a year salary. But there’s also a question here about the timing: Why did [Pena Nieto] go after her now?
One answer is that [the government] finally got its act together and collected incriminating evidence. They’ve become much better at financial tracking. But another answer is that she had become a political adversary opposed to the government’s reform project. And [her arrest] is a way to diminish her power, if not remove her altogether from the political scene.
Gordillo’s arrest also sends out a warning to other people that might oppose Pena Nieto’s reform project. It’s a little bit of a shot across the bow—that “not only are we going to push this reform, but if you do not negotiate with us or work with us in some way, we might be willing to use other tactics.”