Costa Rica Drafts Fair Competition Laws to Ease the Fall of the Monopoly.

The Central American Free Trade Agreement (CAFTA), or TLC as it’s known in Spanish, has brought many changes to Costa Rica already. Most notable is the disintegration of the country’s long-standing monopolies, such as telecommunications star, the Costa Rican Institute of Electricity (ICE) and the National Insurance Institute (INS). As new laws pass and the country opens up to foreign competition for public services, many new rules and regulations will pass, helping protect Costa Rica and its companies.

The new General Law of Telecommunications, which allows for an open cell phone and internet market, is already well on its way to showing solid results. The General Law gives the Public Services Regulatory Authority (Aresep), which controls the prices of public services like buses and cell phones, nine months to approve all regulations required by Cafta. In latest news, Aresep has approved the Access and Interconnection regulation, which requires that all telecommunications providers provide interconnectivity.

According to Access and Interconnection’s rough draft, which will be made public on August 25, the new Superintendent of Telecommunications (Sutel) will take responsibility over telecommunications operators and providers. Sutel will also make sure that all telecommunications companies adhere to the many criteria outlined in the Law for the Promotion of Competition and Effective Consumer Defense.

“Nevertheless, every operator or provider will be obligated to provide interconnection to its networks, even when it doesn’t seem important, all this with the goal of assuring the best level of openness and possibilities of communication with clients,” the law states.

In similar Costa Rica News, the country’s insurance market will be a step closer to opening its doors, fulfilling another Cafta requirement. To make matters more complex, the insurance law will change not only to let outside companies provide insurance within Costa Rica, but also to permit the INS to provide insurance to other countries.

“We’re already ready to confront the competition that will come, it seems to us that the Congress’s debates yielded good results, which will give us the tools necessary to compete and possible internationalize ourselves,” executive president of INS, Guillermo Constenla, said.

Estimates project that the first international insurance companies will arrive in about two years, beginning with Pan American Life. The only insurance company that has yet expressed interest in the Costa Rican market, the U.S.-based Pan American Life plans to arrive “as soon as legislation allows.” According to the company’s president, John Kelly, Pan American Life would like to be “the first to make the most of this country’s market potential.”

As big changes become reality, Costa Rica’s monopolies are not only forced to compete, but to compete openly. For the first time in the country’s history, prices will be partly governed by an open market, giving Costa Ricans choice and freedom to do business where they please. Great care must be taken, however, so that Costa Rica’s monopolies, which have taken care of citizens for years, employing many, do not crack under the pressure of uneven competition. To do so, varied organizations will ease Costa Rica into this new age, helping former monopolies adjust and become true competitors in an open, global market.

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Filed under: Business on July 22nd, 2008