Mexican leftist plans change on "monopolies", mining

Reuters News
Posted: Jan 16, 2012 5:58 PM
Mexican leftist plans change on "monopolies", mining

By Dave Graham

TAPACHULA, Mexico (Reuters) - Leftist presidential hopeful Andres Manuel Lopez Obrador has pledged to break up Mexico's "monopolies" and press foreign mining firms for higher taxes and better wages if elected on July 1.

Lopez Obrador, often vilified by opponents as a threat to private enterprise, said wresting control of large sections of industry from just a few hands was vital to revitalizing the economy.

"This is all going to be corrected," Lopez Obrador, who narrowly lost the last presidential election in 2006, told Reuters in a weekend interview. "In comparative terms, you pay more here for construction materials, telecommunications, for interest on loans than in any other place."

Production of many goods and services, extending from bread and cement to Internet access and television, are dominated by just a few players in Mexico. Economists say the lack of competition has long been a drag on Latin America's second biggest economy.

Speaking in the southern city of Tapachula after a campaign rally, Lopez Obrador said his team had analyzed the data and found that Mexican consumers would save up to 10 percent of their income "if there were no monopolies in this country."

The former mayor of Mexico City came within a hair's breadth of taking office in 2006 and denounced the result as fraud, leading huge street protests in the capital when conservative Felipe Calderon was declared the victor.

Those protests damaged his popularity and recent polls have shown Lopez Obrador with support of between 15 and 25 percent, way behind front-runner Enrique Pena Nieto of the opposition Institutional Revolutionary Party. However, the gap is starting to close.


Touring the country relentlessly for the past five years, Lopez Obrador has sought to temper his image as a left-wing firebrand by courting the business community, encouraging private investment and promising greater prosperity.

He is also ready to use some of Mexico's most powerful businessmen to try and break up the entrenched interests of others.

Chief among the moguls is the world's richest man, Carlos Slim, the dominant force in Mexico's telecoms sector, who worked with the Mexico City government to redevelop parts of the capital when Lopez Obrador was mayor in 2000-2005.

Calderon's government has so far denied Slim the chance to enter Mexico's television market, which is dominated by Emilio Azcarraga of Televisa and Ricardo Salinas Pliego of TV Azteca.

The tycoons have struggled to gain access into each others strongholds but Lopez Obrador said he would not stand in their way if it resulted in greater choice for the Mexican consumer.

"If Slim or any other citizen wants to become involved in the television business, they can. The same applies if Azcarraga or Salinas Pliego or anybody else wants to get involved in the telephone business," he 58-year-old said.

Fostering competition is a daunting task for Mexico.

The country has the highest monthly subscription costs for basic broadband Internet connections and the slowest advertised download speeds in the Organisation of Economic Cooperation and Development (OECD), according to data from September 2010.

And despite the fact that half of the country lives below the poverty line, Mexicans pay among the highest prices for bread and cereals in the 34-nation OECD.

Nevertheless, progress has been made and Slim's telecoms companies have been forced to make concessions under Calderon.

Last year, the telecoms regulator ordered Slim's mobile giant America Movil to make changes that resulted in a 71 percent drop in interconnection charges. Slim also cut charges on fixed line calls from January.


Lopez Obrador said foreign mining companies, among which Canadians predominate, had been treated too generously by previous governments, denying Mexicans their fair share of the benefits from the country's natural resources.

Pay was the first issue that needed addressing, he said.

"So that they pay Mexican miners - if not the same as what they pay a Canadian miner - in a way that takes into account that there is a great inequality," Lopez Obrador said.

Foreign mining firms would also be asked to clean up their environmental practices, which were destroying and contaminating the areas where they work, he added.

"And the third thing we want to convince them of is that they pay the same taxes as they pay in Canada. In Canada, they have to pay 12 percent for extracting minerals. Here, nothing. We're going to put these issues on the table. But we won't revoke concessions. We're not going to expropriate," he said.

Canadian mining firms operating in Mexico include Goldcorp and Pan American Silver.

Mining tax rates for projects in Canada are determined at the provincial level and are based on profits. They vary from 3 percent to 17 percent. Companies operating in Canada must also pay income tax on the provincial and federal level.

Lopez Obrador said his government would not revoke any concessions made to investors in state oil firm Pemex, which Calderon has begun to open up to outside investment.

"But we won't submit any more (concessions)," he said. If elected, he said his administration would build five new big oil refineries in three years so that Mexico could stop exporting crude oil and instead sell the finished product.

But Lopez Obrador stressed that foreign investment would be more than welcome under his presidency.

"We need it. I was mayor of Mexico City and that's when we had the most foreign investment coming to the city," he said.

(Additional reporting by Julie Gordon; Editing by Kieran Murray)