Barbara Anderson

A static weather vane

By Barbara Anderson

The Proposed Budget of Expenditures of the Federation (PPEF) is one of the most awaited documents because it gives clear signals of the government's macroeconomic expectations for the following year, as well as its priorities and to know which issues are relevant and which are not.

It is like a weather vane, a north marker that the Executive Branch puts on its annual plans.

For the last budget of this six-year term, the 4T government made it clear that it is betting on more delivery of social plans, less investment in public health and strengthening the Armed Forces and their building and financial commitment in the six-year works for posterity.

Although the big numbers (the proposed revenues and expenditures) have a careful increase of 4.2% and 4.3% respectively, when it comes down to it, there are clear winners and losers for 2024.

While the most benefited ministry in almost the entire six-year term, such as the Welfare Ministry, has an upward adjustment in its spending of 25%, the most erratic ministry, such as the Health Ministry, presents a downward adjustment of 55.8%. In a government that has shown since 2018 to be militaristic and oil, it blows the numbers with an increase in the budgets of the Ministry of National Defense (121%) and the Ministry of Energy (273%), especially here because of the new program of "Coordination of the energy policy in hydrocarbons", which are direct transfers to Pemex.

There are as many items and headings within the Expenditure Budget as there are ways to analyze which are the pillars where the end of Andrés Manuel López Obrador's six-year term will settle.

But undoubtedly one of those that is not on their list of priorities is telecommunications, connectivity and, linked to them, economic competition.

For the following year, the government has a budget for all government agencies (regulators and public policy of the sector) of 15,432.65 million pesos, which is divided into funds to finance the Federal Telecommunications Institute (IFT), the National Digital Strategy (EDN), the Telecommunications Investment Promotion Agency (PROMTEL), in charge of overseeing the Shared Network and the Federal Electricity and Telecommunications Commission and Internet for All (CFE-TEIT). Except for the latter, which shows an increase of 24%, the rest of the instances are almost flat versus 2023.

The truth is that this parastatal alone represents 87.8% of the total budget for this item, of the four agencies, almost 9 out of every 10 pesos allocated.

But even this increase in the budget for CFE TEIT is not such, and there is actually a loss of investment by the government in its plan to extend telecommunications networks to the most underserved and least developed areas of the country. In his Fifth Government Report, the President announced a few days ago a budget of 20,790 million pesos for CFE TEIT versus the 13,453.90 million pesos stated in the PPEF 2024. It is enough to compare both documents of the Executive Branch to see how in just one week the budget (53.39%) for next year of the national expansion project of the telecommunications branch of the CFE was reduced by more than half (53.39%). The budget of this branch of the state-owned company is for the deployment of infrastructure and antennas in areas without access to telephony or mobile internet.

An increasingly lean regulator

If the PPEF 2024 is analyzed, the IFT is the only one of the eight autonomous government bodies that remains with a budget identical to the current year (1,680 million pesos), an amount that has not even been adjusted for inflation.
Seen in perspective, the Institute is undergoing a process of downsizing. It has been systematically losing budget steadily, going from 1,780 million pesos in 2019, 1,730 million pesos in 2020, 1,510 million pesos in 2021 and 1,560 million pesos in 2022.

They say that there are two ways to silence agencies that the government does not consider relevant: one is to take away their budget and the other is to render them inoperative by not appointing their strategic personnel (such as commissioners to complete their plenary sessions).

The IFT has been the victim of both strategies. On the one hand, the cut in resources and on the other hand, in personnel, since the regulator currently operates with only four of the seven officials required by its Plenary. The IFT has been operating incomplete since 2020. The lack of commissioners affects the functions of the Institute and limits the discussion and resolution of central issues in competition matters. One of them is precisely the issuance of América Móvil's asymmetric measures for the first quarter of 2024, which could be delayed if the three pending commissioners are not appointed.

What happened to the spectrum?

For several years, private mobile telephone operators have been demanding an adjustment in the annual payment of fees for the use of the Mexican radio electric spectrum(one of the most expensive in the world). Those offering mobile telecommunications (América Móvil, Telefónica, AT&T Mexico) have tried to convince the Ministry of Finance and Public Credit (SHCP) to analyze the cost of this basic input based on context and international reference prices, which is nothing more and nothing less than a state patrimony (i.e. its collection is part of the Federal Revenues). No cost adjustment has ever been achieved since its exploitation was determined in 1996. According to the IFT itself, the spectrum is overpriced by 60% compared to international cost averages and is equivalent to 90% of the fixed costs of mobile operators.
Due to the high cost, two years ago Telefónica returned all the spectrum where it operated and AT&T also returned part of its spectrum.

The radio electric spectrum is part of the federation's income, it is an asset that the Treasury has never wanted to touch and for which it expects to collect 16,817.28 billion pesos this year. The only surprise in the PPEF 2024 is that the cost of the spectrum remains at the same amount as in 2023, without even adjusting for inflation (a detail to the operating companies that the Treasury also had in 2022).

In December last year, the government presented its National Development Plan and Spectrum 2022-2024 in the Official Gazette of the Federation. "For the government of Mexico, access to broadcasting and telecommunications services, including broadband and Internet, is part of the objectives to achieve equity and social justice", where "the following principles have a direct relationship with the National Radio Spectrum Program: economy for welfare, the market does not replace the State, for the good of all, first the poor and leave no one behind, leave no one out." But curiously, 10 months later this Program does not have a single item within the Federation Budget.

Telecommunications have not been a priority for this administration.

Not even the imminent Dorado that promises industrial relocation in the country (the much-trumpeted nearshoring) and its powerful contribution of foreign direct investment have been enough for the government to invest in more infrastructure in this sector, not even in its social programs of universal digital coverage.

The Altán bailout proved to be a political move rather than an opportunity to increase access to ICT for vulnerable and remote groups and, according to what it allocates for 2024 to CFE TEIT, there is also no powerful push to provide access to telephony and social internet through a parastatal company.

Furthermore, with the lack of resources and personnel at the IFT, it is only maintaining the status quo in a sector with the quasi-monopolistic presence of a company that holds 70% of the market (América Móvil), which leaves few opportunities to increase competition on the one hand, and discourages investment by telephone companies to increase geographic and population coverage from the private sector.

The weather vane of telecommunications spending was, is and will remain immobile.