The purpose of competition law is to set the rules of the game so that they are observable and that all market participants do so under the same conditions. The problem is that when there is no law, there is a tendency to engage in anti-competitive activities because they are not prohibited, and this is what is called “unfair practices.”
This is stated by Guillermo Díaz, coordinator of the Research Institute in Socio-Humanistic Sciences of the Rafael Landívar University (URL), who, in an interview with Prensa Libre, added that sometimes this limits access to markets or harms the consumer because there is no enough supply of certain products or you have to pay more for them.
In your opinion, what is competition culture?
We must remember that historically we come from protected markets, in light of the import substitution model and we had to have high tariffs to make the national industry flourish.
Subsequently, we entered economic globalization and today, tariffs on average are 5% to 7%, and there is a good part of the goods that are imported from the United States that no longer pay that tax, but pay VAT (VAT). added value) of import. So, we have gone from a world of business protection with captive markets to a more globalized one in which that protectionism does not exist.
Now, it is regarding equal conditions of competition and the rules of the game to remove entry barriers that may exist or anti-competitive practices and that is what we are trying to do with this initiative.
In a real situation, what can change?
I remember a conversation with a businessman more than 20 years ago in the footwear industry, and he was already clear that his competition was with China and that he had to find inputs in Brazil or another country. Meanwhile, a consumer goods distribution company was clear that its competition came from North America and that it would establish itself in Guatemala.
“We have gone from a world of business protection with captive markets to a more globalized world in which such protectionism does not exist”
Guillermo Díaz, economist and sociologist
So, in its business strategy, the first sought to compete by seeking efficiency and innovating, which is why it continues in force, and the other decided to ally with its foreign competitor and eventually, almost disappeared.
So, entrepreneurs must make decisions regarding the direction of their business model: whether they are going to seek efficiency to compete or whether they are going to join or exit the market. I don’t want to say that with the competition law companies will disappear, but rather that it will force them to improve and the best example of this is the sugar industry.
In the game of words and from your point of view, for whom is competition good and for whom is it not?
For society as a whole, competition is good. It is not the best example, but the arms industry in Russia is known for its famous AK-47, and it is precisely the competition of the US, where this type of weapons had to be developed. Competition is the engine of innovation, growth, and continuous improvement.
Obviously, in particular, some benefit and others do not, which must be elucidated by each State, in accordance with its economic policy, because there are sectors that must be strategically protected, such as food security. Nor is it a free market as such, as some would like.
Why is there a belief that prices might drop?
It can generate a decline, whether temporary or focused because marketing-wise, when a company is going to enter the market it has two ways: with a low price or with a high one. Generally, companies will have to compete with existing ones and to achieve a space in the market, they must give an incentive to the consumer.
With the competition law there will not be a generalized or immediate reduction, but this can occur to the extent that new competitors enter and use a low price as a strategy to immediately win consumers.
Why is it said that the Guatemalan economy is based on price?
Not me, but market research agencies, who state that the Guatemalan economy is based on low prices and is very accustomed to discounts.
In the real economy, which sectors already apply free competition?
One can observe the banks, with a variety of interest rates, promotions, services, service points, among others; the beer industry, of which we already have a diversity of brands and prices; soft drinks and bottled water, etc.
That is to say, there are many sectors in which competition is already occurring and the consumer benefits.
The private sector asks that a law be approved that does not harm the economy. What fears might initiative 5074 be causing?
I think that the fears have been corrected and when we started talking regarding this many years ago, there was a fear that it would be a law regulating prices, but it has now been clarified that a competition law is not for that.
Perhaps one of the fears, and this is what some economic agents have expressed, is that perhaps a Competition Superintendency might be used for political purposes once morest a particular company, which I do not think is easy to do. Again we can see it there with autonomous entities such as the Superintendencies of Banks or Tax Administration.
These are fears that arise, but if a good one is approved, there will be no room for that type of practice.
“Competition is the engine of innovation, growth, and continuous improvement”
Guillermo Díaz, economist and sociologist
How should economic agents prepare?
They have to prepare for compliance, training and hiring the necessary personnel to avoid engaging in prohibited practices when the law comes into force.
What are your scenarios?
The good scenario is that the law is approved, that the Competition Superintendency is created, the staff is trained and studies are carried out to empirically demonstrate how much competition exists in the market.
The positive scenario is that everything works and that the results are beneficial for the population, as was the liberalization of the gasoline, exchange and telephone markets, among others.
The negative scenario is that the law is not approved; May we continue discussing the topic for a long time to come. And the worst scenario is that it has to be approved due to some sanction or international pressure.
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