Privatization of Telmex

Privatization and deregulation in the 1990s had a significant impact on the progress of basic infrastructure and information infrastructure development in Mexico.

Mexico’s public telephone company, Telmex, was privatized in 1990 with mixed results. There was no regulatory body put in place to oversee the telecommunications industry, however the IEG report notes that competition in the form of a growing number of private firms entering the industry has resulted in a sort of checks and balances system in which the companies must now keep rates low and customers satisfied or risk losing market share. This competition was delayed for six years after privatization through the granting of exclusive rights to Telmex for both domestic and international long-distance services. While the overall number of telephone lines added across the country expanded by 42% during the first three years following privatization, and both the government and investors had substantial earnings through tax revenues and stock increases respectively, service has remained poor. According to the IEG report, “in 1992, Telmex averaged a million customer complaints a month,” and “in the worst month of the 1993 rainy season, one in nine telephones was out of service.” The Global Information Technology report’s Infrastructure Environment section lists Mexico at 68 out of 134 with 18.54 telephone lines per 100 population, behind other South American countries such as Costa Rica, Argentina, and Brazil.

References

Independent Evaluation Group, The World Bank Group (2001). Privatization and Deregulation in Mexico. Accessed from http://lnweb90.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/02BA59E41714B982852567F5005D8A07?opendocument, February 3, 2010.

The World Bank. World Development Report 2006: Equity and Development.
World Economic Forum.

The Global Information Technology Report 2008-2009. Accessed from http://www.insead.edu/v1/gitr/wef/main/fullreport/index.html, February 3, 2010.