Slim goes socialist: billionaire's self-serving, leftist-minded plea for government protection is just what we don't need.

When Carlos Slim tells us the economic system that made him a billionaire isn't working, it's time to sit up and take notice.

[ILLUSTRATION OMITTED]

And everyone did. La Jornada, the left-wing daily, led the way, glad Slim was finally starting to see things its way--no more free trade agreements and a little more protection for Mexican industry.

However, if Mexico's richest man wants more protection from competition then we should probably just turn out the lights and leave the country.

He makes some good points--the Mexican economy can't compete well because of rising labor costs, high energy prices, an untrained labor force and dilapidated infrastructure. One thing he didn't mention--it also has high telecommunication costs.

The problem is that while he is asking for help making Mexico more competitive, some of his companies have thrived thanks to monopoly powers.

He dominates the telecom industry with Telmex and America Movil, known to consumers as cellular phone company Telcel. He has more than 80% of both markets and Prodigy, his Internet service provider, dominates that market too. He also has a sizeable stake in Mexico's largest construction company, owns retail chains, is one of the largest shareholders of Grupo Televisa and has extensive industrial holdings.

The lack of competition in telecommunications is obvious to everyone, yet it hardly ever makes the front page of La Jornada or any other newspaper unless the United States is suing Mexico.

However, Slim has every right to speak his mind. He has done many good things for the economy and gave it, in many ways, a trouble-free telecom privatization. No government rescue unlike the banks, no bankruptcy like steelmaker Altos Hornos de Mexico. And his ready supply of capital has rescued several Mexican companies over the years, preserving thousands of jobs.

I wonder, though, how the U.S. press would react to Bill Gates calling for less competition. Here the only criticism came from President Fox who wryly noted that Slim's companies seem to be doing very nicely under the current system.

The problem in the telecom sector is a microcosm of the difficulties the economy has had in developing over the last 10 years. A lot of nice ideas in theory sabotaged by poor execution in practice.

Back in the early 1990s the idea was to open the telecom industry up to competition. The first step was to privatize the phone company and give it space to ready itself to face the foreign invasion to come. Then apply regulations and laws to level the playing field and make the sector more efficient, passing along the benefits to consumers in the form of better services and lower prices.

But Cofetel, the telecom regulator, has been a joke since the beginning. Past presidents Jorge Nicolin and Javier Lozano joined the fray recently when publicly criticizing the current president, Javier Arredondo, for achieving what they did--nothing.

None of them were able to halt the Telmex steamroller. A recent report by the federal auditor showed Mexican businesses pay eight times as much as their U.S. counterparts for international phone calls. And cell phone calls are twice as expensive here as they are stateside. These numbers may overstate the problem as large companies cut special deals with Telmex that brings this down. Small consumers, however, can't.

And this is the San Andreas fault line running through the whole of the domestic economy. Over the last decade it has opened itself up to the world through a series of free trade agreements. However, the government has failed to provide an environment that would allow companies to compete. Wherever you look--from cement to television to bread--one, or at most two, companies dominate, making Mexico an expensive place to live and work. It wasn't a problem when Mexico was one of the only open Third-World economies but now everyone is playing the game, including India and China. And the longer the country takes to change, the further behind it slips. Esta en chino, as they say in Mexico.

John Moody is a former reporter for Bloomberg News who has covered political and financial news in Mexico for nearly a decade. He can be reached at [e-mail].

Commentary by John Moody