Since assuming office in December, Mexico’s new president, Enrique Peña Nieto, has wasted little time getting down to business — literally. One of Nieto’s first major reforms takes on the telecommunications business, and it’s well on its way to becoming law. The reform, which empowers a new regulator to target telecommunications firms with monopoly power, has already had one major effect: Around the time Mexico’s state legislatures were ratifying the reform package in Mid-May, Carlos Slim ceded the distinction of world’s richest man to Bill Gates, according to Forbes. Slim’s fall was due in part to the declining value of Slim’s America Movil, which controls 70 percent of Mexico’s mobile phone market and 80 percent of its landlines.
But what’s bad news for Slim will be good news for businesses that operate in Mexico. Like all antitrust reforms, Nieto’s is designed to increase competition in the markets for telecommunications, which represent a crucial part of any country’s business infrastructure. Expect the reforms to lead to some combination of superior products and lower prices, which will make doing business in Mexico both cheaper and more efficient. American telecommunications firms should be doubly excited, as Nieto’s pursuing the reforms to attract foreign telecom investment.
The success of the reform, whose implementation will be overseen by Congress during a six-month period after Nieto signs it into law, also gives Nieto momentum as he prepares for more ambitious economic reforms. This fall, he will push Congress to approve his
Nieto’s proposed energy reforms, which will require a constitutional amendment, would open Mexico’s energy sector to American companies with greater technical competence than the Mexican state firm. Among other consequences, they could lower the cost of manufacturing in the country by opening up abundant new domestic sources of natural gas.
Don’t let your concern for Slim spoil your enjoyment of the good news. With a fortune that continues to hover around an estimated $70 billion, the second richest man in the world isn’t headed for the poor house anytime soon.
And there may be a silver lining for the tycoon. Nieto’s reform also opens up Mexico’s broadcast television market, where other monopolists had effectively blocked competition, offering Slim a golden opportunity. Bill Gates, watch your back.
This post was written by Rich de la Rosa, Director, Advisory Services, Americas.