Mexico & Nafta - January 2007 (ISSN 1741-444X)

General Electric, a US conglomerate with interests in industries as different as aero-engines, broadcasting and financial services, discovered at the beginning of December how dirty established Mexican companies will play to keep foreigners out of their business. 

GE wants to move into the broadcast TV market with its Palmas 26 channel. GE, through its NBC Universal Telemundo subsidiary, has been in partnership with the Isaac Saba family in Mexico since April 2006. NBC Universal Telemundo is one of the biggest Hispanic broadcasters in the US. The Saba family, through its holding company, Grupo Xtra, dominates the pharmaceutical market in Mexico. The two partners want to set up a third national channel in Mexico to compete with Televisa and TVAzteca.

The threat to what is effectively an established duopoly, drew a savage pre-Christmas, and pre-emptive, attack from TV Azteca on the Saba family. The TV channel broadcast an attack on 8 December on the business practices of the Saba family and took a sideswipe at GE. The TV Azteca news show described GE as "a transnational company accused of unfair and monopolistic practices, fraud and everything you can imagine." In the same report, TV Azteca also criticized Grupo Xtra's pharmaceutical subsidiary, Grupo Casa Saba, saying it has "a black history of impunity, abuses and injustice."

Before this frontal attack, TV Azteca and Televisa's evening news programs had run several emotionally charged features sniping at Grupo Casa Saba's pharmaceutical business, claiming that the group was profiteering by forcing ordinary Mexicans to pay more for medicines. These programmes featured weeping parents and other family members, blaming Grupo Casa Saba for making pharmaceuticals so expensive. On 11 December GE retorted by taking full page advertisements in the main Mexican newspapers defending its business practices. The timing of the TV Azteca attack is significant. It came just one week after President Felipe Calderón Hinojosa took office on 1 December. The attacks, however, seem to have worked and to have panicked the government. The weak government is clearly fearful of what two national TV networks could do it if they turned on it. 

On 23 December, Luis Tellez, the communications minister, tried to head off a confrontation. He said that the new government of President Felipe Calderon is not committed to allowing a third national television network. Tellez did not rule out a third national network at some point but said a new network was not one of Calderon's campaign promises. Tellez noted: "in the 100 commitments of President Calderon, there is mention of issuing radio and television franchises in different cities, but there is no mention of a third [national] channel." 

Mexico's television industry is dominated by Televisa, the world's biggest producer of Spanish-language programming, and TV Azteca. They are the only two nationwide broadcasters and produce almost all the nation's programmes. NBC Universal Telemundo announced its partnership with Grupo Xtra (the Saba family company which has interests in tourism and food as well as pharmaceuticals) in April. In September the partners said that they had asked President Vicente Fox to auction a new national channel. Fox, naturally, left that decision to the incoming government. 

The last national channel to be auctioned was the one that became TV Azteca. The channel's owner, Ricardo Salinas Pliego, bought the channel in a privatisation in the early 1990s. Salinas then became close to President Fox but recently (in 2005 and 2006) has fallen foul of the US Securities and Exchange Commission over his treatment of minority investors in his companies which have issued securities in the US. 

The attacks by TV Azteca split the Mexican media. The hugely influential Mexico City daily, Reforma, antagonised Salinas Pliego and TV Azteca by advocating a third national channel. Salinas Pliego authorised a highly personal attack on the Junco family which owns Reforma and El Norte, the Monterrey daily which is the base of the Junco family's publishing business. The attack is significant because one of TV Azteca's top political interviewers, Sergio Sarmiento, a former correspondent for this publication, has a daily column in Reforma.

Salinas Pliego highlighted a long-running family dispute between the founders of the Junco publishing company, Editora El Sol. The founding generation, Rodolfo Junco de la Vega Voigt and his wife, Marí­a Teresa Gómez, had a rift over 30 years ago with their son, Rodolfo Junco de la Vega Gómez. The son emigrated to the US 34 years ago but his sons, Alejandro and Rodolfo Junco de la Vega González are directors of Editora El Sol. They are also now the controlling shareholders in the company and have transformed it, since the end of the 1980s, from being regional newspaper publishing 34,000 copies a day to a national company publishing over 1m copies a day. 

What Salinas Pliego did was to broadcast a video, recorded early in 2006 by Rodolfo Junco de la Vega Gómez, then 84, going over the reasons for his breach with his parents in which he claimed that he had been cheated or robbed of his shares in the company. He also and made allegations about Reforma's impartiality and credibility. Rodolfo Junco de la Vega González, joint managing director of Reforma, said that his father's claims were nonsense because he had never owned a share in the company, despite having been general manager from 1965 until 1972.

The issue of a third national channel is only one of series of tricky decisions Tellez has to take. The other key decision is over the convergence of telecommunications and broadcasting. The Comisión Federal de Telecomunicaciones (Cofetel) is trying to pass this decision on to the finance ministry. Cofetel is asking whether Teléfonos de México is allowed, under the terms of its privatisation in the 1990, to send TV pictures down its cables and if it is, whether the government has the right to charge it as though it was broadcasting the pictures. In October, the outgoing government published the so-called Acuerdo de Convergencia which allowed telecoms companies to offer video and internet services alongside their telecommunications products in return for lowering their charges to other telecommunications companies for using Telmex's local loop. 

Under the terms of the Acuerdo, Cofetel had to clarify whether it would charge Telmex for transmitting TV services down its wires because the privatisation specifically banned Telmex from broadcasting. Cofetel has passed this decision on to the finance ministry which handled the privatisation of Telmex in 1990. Coincidentally, Agustí­n Carstens, the new finance minister, chaired the committee which oversaw the privatisation of Telmex in 1990. Cofetel said that the finance ministry had to resolve the issue because under the law which set it up as a regulator it does not have the right either to introduce charges for new services nor to end restrictions on the original terms of the concession. 

One detail Cofetel has decided: that Telmex will not be allowed to increase its use of the radio spectrum. Any enhanced services, Cofetel said, will have to go on Telmex's existing wavelengths.