Competition Policy in Latin America
85 Pages Posted: 9 Oct 2003
Date Written: October 2003
This paper reports on recent developments in Latin American competition (antitrust) policy from the perspective of the role competition policy in supporting market reform.
Competition policy is an instance of the use of law to influence economic behavior. More than eighty nations have enacted antitrust laws in the last twenty years, mostly based on U.S. and E.U. models. A review of the antitrust activity in Latin America shows that all the larger countries have active competition agencies using modern economic theories and procedures that rely chiefly on administrative agencies rather than the courts. The issues mirror those in the developed world, especially competition problems in the infrastructure sectors. Formal laws and regulations also tend to mirror those in the developed world, perhaps inappropriately so in light of the differing economic scales and cultural traditions of Latin American countries. In many Latin American countries increased openness to international trade probably is more important to consumer welfare than increased local competition in tradable goods and services, but receives less attention.
Some of the active agencies seem to have been quite successful, with Chile probably the leading example in sectoral reform and Mexico in price fixing and merger enforcement. In both cases there is a substantial national commitment to market reforms. In countries where the political and social commitment to market reforms is more ambivalent, or where other priorities prevail, competition agencies appear to have been less successful. Argentina and Brazil fall into this category.
Coordination and regional integration of competition policy, both generally and within the context of the various customs unions (MEROSUR, Andes Pact, Caricom, FTAA, and WTO) remains an unachieved objective. This is a problem because relevant geographic markets in merger and monopoly cases are not, in general, contained in national boundaries and also because benign international mergers are penalized and delayed by the necessity to undergo review in multiple jurisdictions.
No Latin American country appears to focus explicitly on the potential for helpful positive and negative incentive effects on economic behavior, and none appears to be engaged in systematic evaluation and measurement of the effects of its policies. Throughout the region, antitrust and other government policies are undercut by the inability of governments and courts to make credible commitments to consistent, transparent decision-making. Still, many Latin American countries are moving in sensible directions by emphasizing well-publicized actions against price fixers, by undertaking competition advocacy programs, and by targeting public sector restraints on competition.
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