The Mexican Post office’s uncompetitive package deal
When Mexico’s Congress meets for its next session in September, lawmakers are to revive a bill submitted two years ago that will pit supporters of free-market competition against defenders of state industry. The proposal would hand the letter carriers at Servicio Postal Mexicano (Sepomex), Mexico’s state-run post office, a virtual monopoly on all packages weighing 350 grams or less, except in cases where private firms offer premium services like tracking or digital signatures or if their pricing is at least double the state company’s fee.
Companies doing business in Mexico, including multinationals, are accustomed to paying premium prices for dependable document delivery. According to the National Mexican Association of Courier Businesses, in 2003 the country’s express-delivery market was worth more than US$900m and counted some 400,000 clients. Companies such as United Parcel Service, Federal Express (both US), US-based DHL (Germany) and Mexico’s Estafeta dominate the business.
Sepomex’s express-delivery service, MexPost, has attempted to duplicate the same services provided by its private counterparts, including the ability to offer dated delivery receipts. But the state-operated firm is inadequately funded and thus unable to invest in the air and ground distribution infrastructure systems required to compete successfully.
Failed privatisation
Sepomex began losing money in 1999. An attempt in 2000 to privatise MexPost failed. The only bid received was from a French group, Chronopost, which offered US$4.7m, well below the government’s US$18m minimum asking price. By 2001 the company’s annual losses had reached US$64m. At that point Sepomex appealed for state intervention; the communications and transportation ministry presented the bill to Congress in 2002.
Sepomex’s management, as well as its supporters in Congress, namely the left-leaning Partido de la Revolucion Democratica, believe that cornering the market on document delivery will help restore the company’s financial health. If Sepomex is right, the price of doing business in Mexico — which is already high, given the country’s inflated energy, labour and communications costs — could rise further.
