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Why Mexico's So-Called Liberalization Is Bound To Fail Again

Current privatization proposals for the telecom and energy sectors suggest Mexico has learned little from the partial, and failed, liberalization processes of the past.

The Central Bank of Mexico
The Central Bank of Mexico
Luis Rubio

MEXICO CITY — Insanity, Einstein once said, is doing the same thing over and over again and expecting different results.

Thirty years ago, during a deep recession Mexico chose the path of liberalization and privatization to try to finally achieve the economic growth that had been eluding the country during the final period of rule of the center-left Institutional Revolutionary Party (PRI).

In that first period of reforms in the 1980s, the country privatized an ample range of firms (telecommunications, banking, broadcasting, steel and agriculture). A significant sector of the population was not happy. While certain privatized firms prospered, others, especially banks, went bankrupt and generated enormous costs, which the public had to pay through taxes.

More importantly for our purposes here, many of the privatized firms evolved into oligopolies — with a few suppliers controlling the market — obstructing the population's creative capabilities and curbing the potential for economic growth.

Unfortunately many of the reforms being discussed today in Mexico seem to be heading in that direction.

The countries that have had success opening up their economies, liberating protected markets and especially those dominated by state-affiliated firms, share one key characteristic: They've built competitive models that allow the market to function. That happened in the United Kingdom and Chile, two successful cases by any measure.

Things went differently in Mexico. What was owned by the former monopolistic state firms went into private hands, but there was no truly free market wherein transparency and competitiveness determine results.

Two models

I remember a debate in the late 1980s involving a prominent member of Mexico's privatizing entity and another official whom Chile had entrusted with privatizations some years before.

The Mexican official explained his logic in the privatizations process, saying firstly that the most important criterion was that the highest bidder should win, to assure the transparency of the process. He said the lesson of past privatizations was that despite experts' advice to start by selling small firms to win experience, in Mexico they had decided to privatize large firms first, to send investors a strong signal.

The Chilean official, who had prepared a long presentation, understood these comments to mean that privatization had not actually even begun in Mexico. He refrained from making his presentation in order not to seem to be contradicting the Mexican official's statements. Instead, he spoke for barely two minutes, simply stating that the aim of privatization in Chile had not been to make money, but to restructure markets and develop industries.

The criticism was brief but withering, and the subsequent years have proven him right, both in Mexico and Chile.

A quarter-century later, debates here show that Mexico has learned nothing. Instead of discussing how the energy market would be after the current opening up, all that seems to matter is how much will stay in state hands. Instead of trying to find a vibrant and competitive energy market, discussions are all about keeping a Sovereign Fund as an unending source of unaudited monies for all-too-familiar goals.

The same goes for the recent electoral reform, where power was the only thing on legislators' minds. Who would control the electoral process and the business opportunities affiliated with it. With telecoms, the rumor mill (the only, really buzzing market in this country) has it that the reforms are being tweaked and fine-tuned. But discreetly, in the backrooms. Which means we are sticking to our usual logic of clientele politics, influence-peddling, control and corruption. Einstein would remind us not to expect different results this time around either.

The experience in both historical moments suggests there is something in the DNA of Mexican politics that impedes the country from doing things in an open and transparent manner, through market competition. Political leaders seem to reject relying on the creative capacity of Mexicans, and above all abandoning the tradition of using the public sector for personal enrichment or to purchase the intentions that help you win or keep power.

We all know the learning curve is costly, and in that sense, such hiccups would be explicable if we lacked experience. The problem of course is that experience isn't lacking, and in contrast with previous decades, we now also have overwhelming evidence and data.

Our experiences of the 1980s and 1990s and those of other countries are more than enough to convince us that only a competitive and transparent market will allow us to achieve the stated goals of constitutional reforms and economic growth.

As we speak, the case of telecoms and broadcasting is showing us that oligopolies hamper growth. Was that the unstated objective?

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The Unsustainable Future Of Fish Farming — On Vivid Display In Turkish Waters

Currently, 60% of Turkey's fish currently comes from cultivation, also known as fish farming, compared to just 10% two decades ago. The short-sightedness of this shift risks eliminating fishing output from both the farms and the open seas along Turkey's 5,200 miles of coastline.

Photograph of two fishermen throwing a net into the Tigris river in Turkey.

Traditional fishermen on the Tigris river, Turkey.

Dûrzan Cîrano/Wikimeidia
İrfan Donat

ISTANBUL — Turkey's annual fish production includes 515,000 tons from cultivation and 335,000 tons came from fishing in open waters. In other words, 60% of Turkey's fish currently comes from cultivation, also known as fish farming.

It's a radical shift from just 20 years ago when some 600,000 tons, or 90% of the total output, came from fishing. Now, researchers are warning the current system dominated by fish farming is ultimately unsustainable in the country with 8,333 kilometers (5,177 miles) long.

Professor Mustafa Sarı from the Maritime Studies Faculty of Bandırma 17 Eylül University believes urgent action is needed: “Why were we getting 600,000 tons of fish from the seas in the 2000’s and only 300,000 now? Where did the other 300,000 tons of fish go?”

Professor Sarı is challenging the argument from certain sectors of the industry that cultivation is the more sustainable approach. “Now we are feeding the fish that we cultivate at the farms with the fish that we catch from nature," he explained. "The fish types that we cultivate at the farms are sea bass, sea bram, trout and salmon, which are fed with artificial feed produced at fish-feed factories. All of these fish-feeds must have a significant amount of fish flour and fish oil in them.”

That fish flour and fish oil inevitably must come from the sea. "We have to get them from natural sources. We need to catch 5.7 kilogram of fish from the seas in order to cultivate a sea bream of 1 kg," Sarı said. "Therefore, we are feeding the fish to the fish. We cannot cultivate fish at the farms if the fish in nature becomes extinct. The natural fish need to be protected. The consequences would be severe if the current policy is continued.”

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