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AMLO moves to eliminate regulators in Mexico, experts show concerns

. Jan 14, 2021
AMLO Mexico regulation AMLO during a press conference. Photo: Octavio Hoyos/Shutterstock

Mexican President Andrés Manuel López Obrador is sticking to his campaign promise of leading the country through its so-called “Fourth Transformation,” or 4T, for short. With the overarching goal of erasing “privileged abuses” among Mexico’s public officials, AMLO also seeks to reduce red tape in a variety of sectors. The latter objective, however, may involve the eradication of some of the country’s most important autonomous regulators. 

At the beginning of the year, AMLO declared that he will send a proposal to Congress that would see existing cabinet ministries absorb the Federal Economic Competition Commission (Cofece) and Federal Telecommunications Institute (IFT), two crucial Mexican regulatory agencies.

And the list of autonomous bodies to face the chop could get even bigger.

</p> <p>AMLO claims the maneuver would integrate the agencies&#8217; activities without firing their staff members, with the objective of saving up to MXN 20 billion (just under USD 1 billion). According to the president, this amount corresponds to &#8220;half of what [Covid-19] vaccination would cost.&#8221;</p> <p>“Just as funds and trusts were created to work without being audited, so have these ‘autonomous organizations,’ created both by Executive agreements and by law. We have to review all those devices, their functions, so that there are no overlapping activities. We have to save [money], be efficient, and not have so many agencies consuming our budget,” the president said.&nbsp;</p> <p>Also in jeopardy is Mexico’s National Institute for Transparency and Access to Information (INAI), a crucial agency to ensuring press freedoms in the country. AMLO intends to bring the organization under the government umbrella, which has caused a furore among experts, who fear this will strip INAI of its autonomy.</p> <h2><strong>AMLO brings a misguided solution</strong></h2> <p>Indeed, there is a valid argument that Mexico is spending far too much. From July 2019 to 2020, the country’s public debt — already the equivalent to more than 52 percent of the GDP — increased by MXN 1.51 billion. Full 2020 numbers predict the debt to GDP ratio to rise above 55 percent.&nbsp;</p> <p>Ingrained corruption is deemed to be the major drain of the public accounts. In 2020, the total cost of corruption — including bribes or requests for public services and other government contracts — reached MXN 12 billion, almost MXN 4,000 per Mexican citizen.&nbsp;</p> <p>Therefore, reducing the autonomy of regulatory bodies that oversee transparency issues may be counterintuitive, potentially boosting corruption in the name of immediate spending cuts.</p> <p>According to Eduardo Bueno León, a politics professor at the Ibero-American University in Mexico City, the discussion should not be related to extinguishing these independent organizations, but “improving them.”</p> <p>“I believe that the decision is a mistake, especially regarding transparency institutes. While the agency was dismantled during previous governments, it is still important to communicate government decisions and fight corruption. Also, the president’s arguments are not adequate: it is not an agency that costs terribly much. Mexico needs it to be improved,” Mr. León told <strong>The Brazilian Report</strong>.&nbsp;</p> <h2><strong>Regulatory agencies save, not waste money</strong></h2> <p>Indeed, as explained by Miguel Flores Bernés, president of the Economic Competition Commission of the International Chamber of Commerce (ICC), there is a <a href="https://www.itau.com.br/itaubba-pt/analises-economicas/publicacoes/macro-latam/mexico-2q19-public-finances-consistent-with-amlos-austerity-measures">cost</a> built into AMLO&#8217;s proposed change. </p> <p>Official data shows that in recent years, Cofece — Mexico&#8217;s antitrust watchdog — managed to detect anticompetitive practices resulting in a return of MXN 20 billion for the government. With adequate and independent oversight, the state is not losing money with Cofece.</p> <p>Indeed, telecoms regulator IFT has managed to reduce the prices of telecoms and mobile services by 27 and 44 percent, respectively, since its creation in 2013. In all, it has saved the population around MXN 425 billion.</p> <p>Mr. León points out that the IFT has racked up a list of defeats in the Supreme Court, especially in legal fights against business magnate <a href="https://brazilian.report/business/2020/11/27/from-riches-to-rags-fallen-tycoon-eike-batista-tries-a-comeback/">Carlos Slim</a>, the richest man in Latin America. Approved in 2013, a telecoms reform was expected to end Mr. Slim’s monopoly over the sector, but failed to do so, and the two parts are still warring.&nbsp;</p> <p>But in that case, again, it doesn’t endorses Mr. Obrador’s argument. Mr. León explains that the problems in this case lie in the law and justice, not just in the existence of an organization responsible for inspecting the national market.&nbsp;</p> <p>“We have to improve the law and the jurisdiction of those responsible for these institutes. Because if we remove the autonomous scope of these agencies, turning them into state-controlled organizations, Mexico won’t see the necessary improvements,” the expert added.&nbsp;</p> <p>AMLO&#8217;s is set to be submitted to Congress within one month, and will be discussed for many weeks to come. However, before the bill is presented, civil society and experts are trying to get the president to change his mind.

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

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