Many are excited about the entry into force of the Competition Law. They are celebrating with great fanfare that prices will fall thanks to this new law.
However, I believe this stance is quite misguided, considering that we do not necessarily have a market with anti-competitive practices, but rather a market with government practices that prevent competition itself.
The most frightening thing that the numbers show is the red tape in Guatemala. According to a World Bank study, customs clearance times in the country are almost 20 times longer for exports and nearly 9 times longer for imports than in developed countries:
This table shows information about procedures and processing times. You can read the full analysis conducted by UFM Market Trends at this link.
However, it should be noted that the country has a serious problem with excessive red tape. According to the World Bank, Guatemala has the highest number of administrative procedures in Latin America and the Caribbean:
Each of these procedures takes an average of 4.5 hours, which leads to a certain comparison: how much does a procedure cost in terms of a person’s lifetime? With two procedures per product, we already have more than one full day’s work for one person. This is how the entry barriers are procedures that are difficult to measure economically.
Tariffs, which are easy for people to quantify, are so low in Guatemala that it seems like we are a free trade paradise. However, the products that are most needed, those that are consumed frequently and in large quantities, require a lot of paperwork before they can be sold.
For these reasons, I have very little faith in competition law. There is a lot of work to be done as a country to start seeing results. All the paperwork, customs times, logistics times, etc., are factors that add to the cost and distort prices. It is impossible to be competitive if you must compensate for the fact that cargo travels at 12-18 kilometers per hour in the country and not at 75-100 kilometers per hour, as in civilized countries.
It takes us days, not hours, to get cargo through customs, and to open a store or sell a product, we must have environmental, health, and municipal licenses, product registration, premises authorizations, among many other possible procedures. Then, if you have forgotten any of these or have complied with all of them but have caught the eye of a new bureaucrat, you are subject to penalties for social security, occupational safety, taxes, municipal courts, traffic, environmental authorities, customs, health, and others.
Each of these points is an “additional cost” that would be shown in a graph like the one you can see here, the “price added by tax,” since these are taxes that are paid overtime, not in cash:
That said, we consider it highly unlikely that the law will have any effect on sales prices. What is more, it is a mistake in terms of priorities, and, in fact, the Superintendency of Competition could cause even greater costs to the “economic agents” that it drives out of the market, rather than opening up competition. That is why the initial focus of the Superintendency of Competition should be to push for legal and regulatory reforms to improve the competitive environment in the market. A reform like the one Milei initiated in Argentina by eliminating regulations that allowed government controls.