Mail in Latin America – a case study in liberalisation?
NATIONAL POSTS MAY NOT BE MARKET LEADERS
Here in Europe we have been agonising for years about if, and how, and when, to move to a fully liberalised mail market. It looks as though it might happen in 2009, but still there are those who fight a rearguard action.
Yet in many parts of the world there has been a free market in mail — de facto if not always de jure –for years. Nowhere is this more evident than in Latin America, where it could be argued the national posts are in many instances not even the dominant player in postal markets, let alone monopoly ones.
Presenters at Triangle’s recent World Mail & Express Americas conference provided some fascinating insights into what is happening in the region, and this article is based upon some of the information shared with delegates at that event.
Overall, national posts in Latin America look to have less than a 40% market share, and this is skewed by the fact that Brazil Post, by dint of both service innovation and strong assertion of what it regards as its monopoly rights, has held on to 85% of the market in what is the region’s largest economy. Figures presented by SkyPostal indicated that national posts have less than a quarter of the market in Central America, and as little as 15% in the Andean region.
As we will see, statistics can sometimes be confusing, and are often selective. The definition of the mail or letters market is not consistent, and there is undoubted overlap between letters/mail and CEP (Courier, Express and Parcels).
CHILE, ARGENTINA and MEXICO
Let’s take Chile as an example. Here it is generally recognised that the Correos has achieved a significant turnround in the last few years, and is now a formidable competitor. It argues that its share of the postal market (excluding CEP) has gone up from 63% in 2003 to 80% in 2006, although its CEP share is only 14%
A major competitor such as Envia pictures a market up from 408m letters in 2004 to 516m letters in 2006, and in which the Correos share has reduced from 73% to 67%. You must draw your own conclusions. Whichever set of statistics you believe, there is clearly a competitive market in Chile, and the Correos is fighting hard.
Argentina has been at the forefront of postal liberalisation for over a decade. Here is a market that is legally open to all providing would be operators pay a modest licence fee–at the last count there were something like 1100 players! The national post was effectively privatised through a concession system whereby a private operator paid an annual ‘cannon’ to the government to operate the service. The cannon was not sustainable, and the concession reverted to the government. This was in the context of a flat or declining postal market until Argentina began to pull out of recession in 2002. Since then the market has grown from something under 1bn items per annum to 1.4bn. The Correo has been growing but still losing market share, particularly to two key competitors operating in the major cities. The national post’s market share is now around 40%.
In Mexico the national post faces strong competition. In normal letter traffic it is still probably the dominant player, but private operators have taken significant market share, particularly in areas such as utility bills, statements, credit card deliveries, and small high value deliveries such as mobile phones. A company such as ampm lays claim to being the best and largest delivery company in Mexico. It argues that private operators have 60% of the market–but, as ever, the key is how you define the market.
PRIVATE OPERATORS OFTEN HAVE A SERVICE EDGE
Whatever the precise market share numbers, the areas in which private operators focus provide the key to their success–and the reason why so many national posts struggle in the region. Private operators offer reliability and security where too many national posts do not. They use GPS to help pinpoint delivery locations in countries where the address is often descriptive (‘second street on the right past the Esso garage, then the third house on the left after the chicken coop’) rather than specific. They have carefully recruited and trained staff who are not protected civil servants. They use proper proof of delivery systems with easy customer access.
And as they lose share and market confidence, so many posts in the region fall into a spiral of decline. They look to offer concession arrangements–like Guatemala, and, now Ecuador. They bring in ‘expertise’ from more developed posts. They even go bankrupt, as has happened recently in Colombia. Albert Hernandez of SkyPostal argues that there is a correlation between reasonable accurate, mandatory, post coding and the reverse, when looking at the market share of national posts. Thus Brazil Post is strong in this area and is still very dominant in its market; and countries such as Peru and Colombia have no real post coding and national posts with market share in the teens.
Clearly Latin America provides fascinating insights into what can happen to national posts when they fail to meet fundamental market needs. You must draw your own conclusions about what lessons there are for liberalisation in the rest of the postal world!
