Mexico’s postal service fights to dominate the lucrative lightweight package delivery service

The Mexican postal service Sepomex wants your business. In fact, if you want to send a package under 350 grams, Sepomex wants to make sure it is your only choice.

Sepomex has been calling for legal reform that would give it a monopoly on lightweight package deliveries, which could force private couriers to charge up to seven times the government's prices. The postal service says Mexican laws give it a monopoly on handling small packages but complains those laws are not enforced. Specifically, Sepomex wants Congress to amend laws to clearly state that the postal service alone handles shipments of 350 grams or less. Sepomex also wants to create an independent regulatory organization to investigate postal-code violations and disputes concerning the issue.

Yet in a country where the postal system is perceived to be inefficient, a government monopoly would be a disaster, says Ernesto Romero, president of the National Mexican Association of Courier Businesses. The association includes 30 members that serve 400,000 clients. Those companies post sales of US$925 million a year. Mexico's recent boom in the private courier sector–especially in the niche market of documents–is due to the postal service's inability to provide adequate service, Romero says.

"If you start to quantify the aggregate costs that this would mean for the economy in total, it would be highly dangerous," says Romero, whose association includes companies such as DHL, UPS and FedEx. "A measure of this type would certainly not help strengthen the competitiveness of Mexico–on the contrary, it would be a step backwards," says Romero, who is also the vice president of legal affairs at FedEx Mexico.

According to Sepomex Deputy Director Gustavo Islas, the only way to fix the postal system is to invest in it. Funds earned through the monopoly would improve a system that serves the people of Mexico, he says. "We have the interests of the country in mind," Islas says. Private couriers "have the interests of their companies in mind."

Romero, however, says his main con tern lies in Mexico's businesses, as well as entities such as embassies, all of which depend on private couriers.

"Obviously, we're worried about the economic impact this could have on each of our associates," says Romero, who said be would not guess how much the Sepomex proposal could cost Mexico's private couriers. "But we're more worried about the impact this could have on our clients, precisely because of the conditions of low efficiency in the postal service."

Legal matters. Sepomex believes that the practices of the private courier industry are illegal. According to Sepomex, the current federal postal service law, passed in 1986, prohibits private couriers from sending anything weighing less than 1 kilo. "In theory, that's the case," Islas says. "But nobody's respecting the law."

Romero, however, points out that the Mexican Supreme Court has ruled that private couriers are not violating the law. He says that Sepomex's campaign is nothing more than an attempt to fend off competition. "We firmly believe in open and free competition," says Romero. "But it's not OK to use these types of tactics to displace an economic threat."

Sepomex has been trying to push the reform through Congress. While lawmakers have more pressing concerns, reform is necessary to give Sepomex a financial boost, says Congressman Tomas Cruz, a member of the communication commission in Mexico's lower chamber.

"The postal system is weak, disorganized with problems of corruption and with insufficient infrastructure and obsolete technology," says Cruz.

An official complaint about the postal system has been filed at the federal Attorney General's Office, and Cruz has proposed an in-depth legislative audit of Sepomex. But real change is not possible at Sepomex as long as its director, Gonzalo Alarcon, is at the helm, Cruz says.

"More than a decade has gone by," says Cruz. "It's strange that the same person is still in charge."

In October, Alarcon acknowledged that a criminal organization had embezzled millions of dollars from Sepomex through the cooperation of postal officials.

An investigation by El Independiente, a daily Mexican newspaper, found that in one year criminals had stolen US$1 billion worth of checks–including traveler's checks and checks issued by the U.S. Treasury–from the Mexican mail. The U.S. Treasury Department has since stopped using the Mexican postal service to send checks. The newspaper investigation also found that a Sepomex official who worked at the Mexico City airport was killed after learning about the criminal operation.

Because of public distrust of the postal system, Mexicans regularly employ courier services and messengers. There is also a thriving underground mail network, consisting of illegal private couriers that do not pay taxes. Cruz estimates that there are thousands of such companies throughout the country.

Mistrust. Since Mexicans don't trust that letters sent through the postal service will arrive on time–or at all–they regularly pay utility, rent and other bills in person or hire someone to do it for them. Businesses, even small ones, usually have a messenger on staff.

"That culture shows no sign of dropping off," says Daniel Lund, who runs public policy polling outfit Mund Americas in Mexico City and has surveyed businesses annually since 1991. "People assume the mail will not function for them." Lund says that nothing officials say could improve public trust of the postal system. "It's not a question of someone announcing a reform," Lund says. "People's attitudes are formed by their experiences."

Rolando Carlin, owner of Galeria Carlin in Mexico City's Zona Rosa, regularly relies on FedEx to send jewelry to clients throughout Mexico, as well as to stores in San Francisco and London. He doesn't trust Sepomex and says that he would hate to use the government service. Putting Sepomex in charge would be a disaster, he says. "That would be the worst thing that could happen to businesses in Mexico," Carlin says.