Mexico: COFECE criticizes direct award of contract for social welfare programs

The President of Mexico’s Federal Commission of Economic Competition (COFECE), Alejandra Palacios, issued a statement published by the newspaper Reforma, regarding the recent announcement of a direct award in favor of financial institution Banco Azteca, who was selected to manage the social welfare programs ‘Jóvenes Construyendo el Futuro’ and the ‘Pensión para el bienestar’, two flag-ship programs for the incoming government

Referring to awarding public contracts without a bidding process in general, Palacios highlighted that “although the law of acquisitions allows some exceptions, on multiple occasions the COFECE have indicated that these should be limited […] because they allow authorities to make discretionary decisions that carry the risk of causing a permanent lack of competition … ”

Palacios points out that, while Banco Azteca is the bank with most branches in municipalities with high and very high marginalization (main objectives of assistance programs), it has only 2% in ATM coverage nationwide, so one possible option would have been the award the contract to several financial institutions in order to obtain the widest coverage with the lowest costs. The commissioner continued, warning that although the direct award is legal, “[…] this does not mitigate the potential permanent impact that the decision may have on the competition dynamics of the banking sector.”