The last ten years have seen many Latin American and Caribbean nations enact or reform competition laws, and numerous other jurisdictions are considering following suit. The evidential base to guide such policymaking is, however, limited. In this paper we have assembled two databases, one concerning allegations of anti-competitive acts in newspaper articles and another concerning the relationship between competition-related factors and the effects of reforms to liberalise markets, that may go some way to remedying this deficiency. In so doing, we have noticed a number of matters that producers and consumers of research in this area should probably bear in mind.
In the context of the negotiations on the Free Trade Area of the Americas (FTAA), it has been proposed that signatories agree to enact and enforce a national law against private anti-competitive practices. This paper assesses the feasibility and desirability of such an initiative. The paper starts by documenting and discussing the experience with national anti-cartel enforcement in six jurisdictions in the Americas. In three of these jurisdictions-Brazil, Mexico, and Peru-the prosecution of cartels-including some international cartels-suggests that such enforcement efforts are, indeed, feasible. The paper then goes on to quantify the overcharges paid by Latin American economies on their imports of vitamins during the ten year-long international conspiracy to cartelize the market for such goods. The percentage increase in the import bills for vitamins of those nations that do not have active cartel enforcement regimes is found to be at least eight percentage points higher than those with such regimes. Given the magnitude of vitamins imports in Latin America, in certain jurisdictions this differential increase translates into millions of dollars of extra overcharges on an annual basis-and compares favorably with the state outlays on competition enforcement. Such considerations imply that the proposed FTAA-related initiative considered here is likely to be desirable too.
During the 1990s the European Commission and the United States Department of Justice between them prosecuted over 40 cartels that involved private firms and whose effects went beyond national borders. These private international cartels were found in a wide range of products - from citric acid, vitamins, newsprint, and fax paper to shipping and chemicals such as aluminium phosphide and sodium gluconate. Furthermore, these cartels tended not to collapse under the weight of their own incentive problems, as 24 of them lasted at least 4 years. The latter fact suggests that market forces alone may be unable to quickly undermine attempts to fix prices, rig bids, allocate quotas and market shares; perhaps implying a potential role for national anticartel enforcement.
We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not otherwise. We use panel data covering the period 1980-2004 and 124 countries to test this theoretical prediction. Our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions. Our main results hold when we control for the effects of income, time varying common shocks, regional fixed effects and various additional covariates. They are also robust across different samples, and to the use of various alternative measures of natural resources, democracy and corruption.
