Markets in Central America and Mexico: What Is Happening with Competition?

Given their lack of competition, market functioning in Central America2 has become a topic of growing importance and attention. In recent years competition policy has evolved rapidly throughout Latin America, and has been included in the policy agenda of governments throughout the region.3 The purpose of this text is to evaluate the means by which some Central American countries have ratified competition laws, to analyse the characteristics of those laws or of the bills that are currently the subject of congressional debate and to identify the principal problems they experience while exploring possible solutions. Some existing laws or bills in Central America were influenced by those of Mexico, a country that has been applying such legislation for more than a decade (since 1992). That precedent justifies the inclusion of an analysis of that country as a reference point for much of the research carried out in this book. This work assesses the reasons why those countries that have had such laws in place for a decade or more (Costa Rica, Panama and Mexico) have had to make changes to their competition laws in order to strengthen competition agencies. In the case of those nations that have only recently approved this legal and institutional framework, which is to say El Salvador (2004) and Honduras (2006), this study depicts the challenges they have faced in overcoming deep-seated opposition to approving such laws, as well as the extent to which they contain advances compared to their predecessors. Lastly, we point out the obstacles to approving such legislation in the two countries that have yet to adopt a competition law, Guatemala and Nicaragua. As was the case in El Salvador and Honduras, theresistance in these last two countries emerged from an optimistic view of the market’s self-regulating capabilities as well as a deep-seated opposition from within the business world. With the exception of Guatemala, however, a conviction developed throughout the region that the lack of a competition policy constitutes an insurmountable obstacle to achieving proper resource allocation and efficiency at the level of production. Within this analytical context, this chapter reflects on the experience and the most adequate competition framework for small economies and developing ones such as those of Central America. This reflection also seeks mechanisms for strengthening legal bodies that attend to competition problems, as well as the forms that help to politically value the issue of competition in a way that allows it to become a true priority in governmental agendas.