Competition Policy in Latin America: Legal and Institutional Issues

Latin America has emerged from the lost decade of the 1980s with substantially transformed economies characterized by sounder fiscal policies (cuts in expenditures, increases in revenues through better tax administration and from the one-time proceeds of privatization), substantial deregulation and decentralization of economic activity, outward-looking trade and investment policies, and greater domestic savings. While progress has been uneven across the region, in virtually all countries a more prominent role is envisaged for the private sector as the future engine of growth. Unlike earlier decades in Latin America where macroeconomic/instability and import protection coincided with a domestic competition policy characterized by price and exchange controls as well as capacity licensing, the new Latin America has called forth the need for an entirely different approach to fostering a competitive environment for private sector development. This is particularly important in a region where there have historically been very high concentrations in the manufacturing sector which could be exacerbated through uncontrolled privatization. Infrastructure privatization has largely been handled through separate utility regulation statutes. Competition policy (or antitrust policy in the U.S.) can be defined narrowly in accordance with the practice of the majority of OECD countries “as the body of laws and regulations governing business practices (horizontal or vertical agreements between enterprises, abuses of dominant positions, monopolization, mergers and acquisitions). However, it is often viewed in a broader context to include the myriad of government policies that impact competition at both the local and national level including trade liberalization (import competition), foreign investment regulation, protection of property rights (including intellectual property) and consumer protection to name a few. The core objective of competition policy in nearly all jurisdictions is to preserve and protect the process of competition not competitors with a view to maximizing economic efficiency (both allocative and dynamic) by achieving efficient market outcomes in the form of lower consumer prices and better quality products. Some countries or jurisdictions also include broader “public interest” objectives (regional development, promotion of small business, export promotion, decentralization of decision-making) which often tend to undercut the fundamental efficiency objectives of competition policy. This paper examines recent Latin American experiences (legislative, institutional and enforcement) with the establishment of competition policies at the national level, using the narrower definition of competition policy. But it also examines the nexus of competition policy and the broader framework of trade liberalization, consumer protection, foreign investment regulation, and intellectual property protection. Finally, the paper looks at competition policy from a sub-regional and regional integration context (MERCOSUR, Andean Pact and NAFTA), and the prospects for international convergence. The paper does not purport to explain why competition policy is important (this has been elaborated in numerous scholarly books and articles) but rather evaluates how it has been implemented to date in Latin America and to suggest some areas for