Big Brother To Get Bigger in Mexico

By Don Quijones, Spain & Mexico, editor at WOLF STREET. His blog: Raging Bull-Shit.

Since taking office last year, Mexican president Enrique Peña Nieto has embarked on an ambitious reform program that seeks to transform the country’s political and economic landscape beyond all recognition. The program includes new tax laws, anti-monopoly legislation and sweeping reforms to banking, education, energy, and the telecoms and broadcasting sectors.

Nieto’s reformist zeal has won him plaudits from the international business press and national leaders, including President Obama himself. However, as The Economist reports, most Mexicans remain wary – and nowhere more so than with regard to the latest batch of legislation to fall off the reform carousel: the Telecommunications and Broadcasting Act, which was approved this week by the Chamber of Deputies.

The new law has received a mixed response, for the simple reason that it is a mixed blessing. If approved by the Federal Telecommunications Institute, it has the potential to deliver results that are at once good, bad, and downright ugly.

The Good

The most positive aspect of the legislation is its anti-trust drive. For decades, Mexico has been in the grip of monopolies and duopolies, both public and private. The monopoly in the telecommunications sector is América Movíl, which controls 70% of the mobile market and 80% of the landline market. With operations in 17 other Latin American countries, América Movíl is far and away the largest telecoms operator in the Americas.

It is also one of the most expensive.

In Mexico, one of the most unequal countries in Latin America with a poverty rate of over 50%, mobile and landline charges are among the highest in the world. This price gouging has allowed América Movíl’s majority owner Carlos Slim to scale the ranks of the world’s richest billionaires, to the point that he now consistently places among the Top Three on Forbes’ Rich List. Like fellow top placer Bill Gates, Slim owes much of his fortune to one main factor: monopoly power.

Like any billionaire monopolist, Slim’s business senses are finely attuned to the winds of change. Glimpsing the writing on the wall, Slim has already preempted the antitrust legislation by selling many of América Movíl’s assets in Mexico, with a view to reinvesting the money in energy, infrastructure and real estate, both in Mexico and in other strategic markets such as Brazil, Peru and Colombia.

For the likes of Slim, for whom money is now virtually free thanks to the unlimited largesse of the world’s central banks, opportunities abound in the liberalizing economies of Latin America. “I’m optimistic that with the low-interest rates in the long term, the opportunities to invest in our countries are significant,” Slim, 74, told Bloomberg. “We have to take advantage of this great window while it lasts.”

In short, while the new legislation will hardly put a dent in Slim’s fast-growing fortune – a fortune which, at just over 70 billion dollars, dwarfs the GDP of many national economies, including Uruguay, Costa Rica and Nicaragua – it will at least wrest away some of his control over the telecommunications and broadcasting sector, unleashing in the process greater competition and lower prices for consumers.

That is the positive side of the new law. However, as El Confidencial warns, the anti-trust measures are effectively a carrot hiding a much larger stick within the large- and fine-print – a stick that could soon be wielded against political and social activists, investigative journalists, high-profile members of the political opposition or any other groups that threaten the status quo.

The Bad

Like similar laws that were recently passed in the U.S. and the UK, Mexico’s telecommunications act effectively enshrines a whole new raft of government surveillance powers:

    • Pinpoint Localization. It forces telecom providers to collaborate with security forces in the “geographic localization” of mobile telecommunications equipment. According to supporters of the law, this will help police and security forces combat criminal activities such as drugs trafficking, extortion and kidnapping. However, it could just as easily be used against political opponents, journalists, and activists.
    • Big Brother’s Little Brother. In echoes of U.S. telecommunications legislation, Mexican telecom providers will have to store all of their users’ meta data (origin and destination of phone call, time and duration, identity of callers…) for up to 24 months. During the first 12 months the security forces will be able to access any data in real time, and without having to seek judicial approval. “It does not state exactly who will have access to that data, which opens the way for serious human rights violations to be committed – in a country where an already very high number of journalists have been attacked or killed,” warns Aleida Calleja, a member of the Latin American Regulatory, Media and Convergence Observatory (Observacam).
    • Political Control. The data trove could also be used (or better but, abused) to undermine political opposition. As the European Court of Justice recently cautioned, mass communications surveillance programs are far more likely to be used to monitor political opponents than fight crime.
    • Signal and Content Blocking. The law also mandates the immediate suspension of telephone services at the government’s request, granting authorities complete, indiscriminate power to shut off communications during certain events – events such as, say, political demonstrations. “It’s particularly worrying in the context of social protest, a right that has already suffered serious setbacks in recent years,” says Luís Fernando García, a digital rights lawyer. “The state is awarding itself powers to disrupt and suppress protest, prevent journalists from going about their work and hinder the documentation of human rights abuses – in sum, measures that are typical of authoritarian regimes and that were recently applied by Mubarak’s dictatorship during the Arab Spring.”
    • “Bye-Bye Net Neutrality.” Like its direct neighbor to the North and unlike the European Union, the Mexican government refuses to guarantee net neutrality – the principle by which Internet service providers and governments should treat all data on the Internet equally, not discriminating or charging differentially by user, content, site, platform or application. As El Confidencial warns, if taken to its logical conclusion, this would mean that certain clients that are prepared to pay more, such as banks and multinational corporations, would enjoy far superior broadband services than smaller websites. But that’s not all: the government will also have the power to censor and even close down any type of website or blog.

The Ugly

If given the green light by the Federal Telecommunications Institute, Mexico’s new law will be the first blanket legislation to be adopted by an ostensibly democratic nation that openly restricts the freedom of the Internet – it is unlikely be the last.

What makes the new law particularly ugly and dangerous is not just its content but the context in which it will be applied. While there can be no doubting the need to combat the scourge of both organized and disorganized crime in Mexico, doing so is more or less impossible if the government and forces of law and order have themselves been captured and subverted by the same criminal groups they are supposed to be fighting.

In Mexico, the government has lost almost complete control of corruption while at the same time preserving many aspects of its authoritarian past, warns Columbia University Professor Edguard Buscaglia. The judicial system, all too often disorganized, toothless and highly politicized, is incapable of stopping the rot. The inevitable result is a culture of gross impunity and what Buscaglia calls “disorganized corruption.”

By giving the authorities even greater power and control over the people they are supposed to serve, while requiring very little in the way of contingent responsibilities or judicial oversight, Mexico’s new Telecommunications and Broadcasters Bill risks making a very ugly problem a whole lot uglier. By Don Quijones.

Something big is going down in Latin America: A slow-moving tectonic shift threatens to split the continent down the middle on ideological lines. Read….  The New Wave of Washington Consensus in Latin America


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