Published by Minyanville

World’s richest man Carlos Slim has shown that you don’t get away with fining one of his companies $1 billion without explaining yourself. His América Móvil (AMX) faces the record-breaking fine for its cellphone subsidiary Telcel’s monopolistic practices, ordered by Mexico’s Federal Competition Commission (CFC). Telcel has a 71% market share in the country.

Slim intends to contend the fine, calling it “arbitrary, biased, opportunistic and excessive.” América Móvil, one of the world’s biggest telecommunications providers with 225 million customers stretching across the Americas from the United States down to Argentina, has 30 days to appeal. The ruling was made by CFC commissioners who drew 2-2, leaving the casting vote to CFC president Eduardo Perez Motta.

The company is expected to report moderate sales and profit growth for the first quarter of 2011. A $2.02 billion profit is likely to be announced, with revenue of $13.64 billion and earnings before interest, taxes, depreciation and amortization around $5.5 billion. A formal report is expected to be made by the company on May 2.

The Financial Times asked whether Slim was “winning or whinging” in his row with the CFC. The fine amounts to 8% of 2010 revenue, however, the London newspaper claims that comparisons with similar fines across the region would suggest that it was not out-of-line.

“Over the last two decades there have been plenty of examples of similar sanctions imposed on companies that took advantage of their monopolistic powers,” Ernesto Piedras, head of the Mexico City-based Competitive Intelligence Unit told the newspaper. He added that Telcel had got off lighter than it may have done in the European Union, where companies are fined 10% of worldwide annual revenue (which would have amounted to $4.8 billion in this case) or Brazil, where the fine stands at 30% of annual revenue (or, for Slim, $3.5 billion).

Penalties are being increased, however, as the Mexican senate approved changes to competition law. The CFC will have greater investigative powers and ability to impose more stringent sanctions. When he presented the bill in 2010, president Felipe Calderón said that 30% of all household expenditure in his country is made in markets where lack of competition is a problem. This, he claimed, meant Mexicans are paying 40% more than they should have to.

Slim always has something else on, however, and this week it is a partnership with former US president Bill Clinton in order to launch a soccer project for 900 youngsters of Mexico’s notoriously violent state of Chihuahua, home of Ciudad Juárez.

Drug War

After issuing its first official travel warning on Mexico, the United States has further risen tension between the countries by broadening it, advising citizens to avoid certain areas altogether and not drive at night. The warning urges US citizens to defer non-essential travel to areas such as Tamaulipas and Michoacán as well as eight other states.

Tamaulipas saw the discovery of 183 bodies in the last month. A drug gang is thought to be kidnapping bus passengers before killing them and hiding their remains in secret graves.

Japanese Investment

Japanese investors are turning from Brazil to Mexico as a second venture into the Latin American market. The appreciation of the Brazilian real is making Japanese investors look for new openings, with peso-based investments looking most promising, according to the Wall Street Journal.

The peso has the potential to appreciate and has higher yields against the US dollar. “We are...talking to our investors in Japan. We keep telling them to look at Mexico as an investment source,” Tony Volpon of Nomura said. “You look at Brazil, where most of the money is going—there's a lot of policy uncertainty. It's clearly an economy that is overheating.”

Stocks

The Mexican IPC index slipped slightly this week, falling 0.2% on Wednesday down to 36,827 points, as it cleaved itself from its usual ebb and flow with the US markets. Femsa (FMX) shares were down 1.2%. Cement manufacturing giant Cemex (CX) also fell 1.2% while copper mining and railroad company Grupo Mexico (GMBXF) saw shares down 2%.

The country’s general economic news was more positive, however. March saw the third trade surplus—$1.45 billion—in a row thanks to rising crude oil prices as well as continued demand for manufactured goods from abroad—primarily cars headed north of the border.