OECD Product Market Regulation (PMR) Indicators: How does Mexico compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Mexico
1.61
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Mexico
OECD average
5 Most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to the Districto Federal de Mexico. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Product market regulation in Mexico is less competition-friendly than in most OECD countries. Public ownership of firms is lower than in many OECD countries, but the corporate governance of state-owned enterprises is not in line with key OECD best practices. There is also scope to better align rules governing public procurement with key OECD best practices, in particular to facilitate participation by foreign firms in public tenders. In addition, price controls are more extensive than in most OECD countries, and foreign firms and investors face high barriers to enter Mexican markets. However, efforts have been made to simplify the interaction of firms with the government and the licensing regime is quite lean. Further, the rules that regulate the interaction between interest groups and public officials during the regulatory process and regulations that deal with conflicts of interest concerning public officials are broadly in line with international best practices.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Mexico
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Mexico
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to the Districto Federal de Mexico. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS The regulatory set-up in most network industries are less conducive to competition than in most OECD countries, especially in energy and transports. In contrast, regulation of professional services is more competition friendly, except for notaries and real estate agents. The retail sector could benefit from a reduction in regulatory barriers to competition, though the regulation of the retail sale of medicines is already very competition-friendly.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Mexico 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Mexico 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to the Districto Federal de Mexico. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
With regulatory barriers to competition that are higher than the OECD average in several areas, there is scope for improving product market regulation in Mexico.
Strengths
Challenges
Lawyers face low barriers to entry, and limited conduct regulation when compared with most other OECD countries. For instance, lawyers can compete on fees, law firms can take many legal forms, and non-professionals can invest in law firms.
Water transport has one of the most competitionfriendly regulatory framework in the OECD, though there are some restrictions on cabotage by foreign transport firms.
The governance of state-owned enterprises is not in line with OECD best practices. For example, state-owned enterprises benefit from exemptions from laws and regulations that apply to privately owned firms, and in some sectors they can enjoy better financing conditions than privately owned firms. In addition, line ministries directly exercise ownership rights, and in some sector, there is no clear separation between the public body that exercises these ownership rights and the industry regulator.
The regulatory framework for public procurement does not ensure a level playing field for all potential bidders, in particular with respect to the procurement of public works.
Regulation of professional services is in general competition-friendly, except for estate agents who are subject to stricter regulation in Mexico than in most other OECD countries. In particular, territorial restrictions stifles their mobility, entry in the profession requires meeting strict requirements, and their fees are regulated.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org