There is no doubt that the enactment of a competition law and the creation of a specialised agency to enforce it are key conditions for the development of a favourable economic environment in any country. Mexico started this process in the early 1990s, with the approval of the Federal Law of Economic Competition (FLEC), and the creation of the Federal Competition Commission (CFC or Commission). This chapter seeks to tell the story of the economic context that preceded the enactment of the FLEC and the creation of the CFC. It describes the environment in which the competition regime was adopted and explains how the Mexican competition authority became a strong and active agency, with a stable institutional structure that, combined with technical and operative autonomy, guarantees the independence and impartiality of its actions. For decades, the Mexican economy was characterised by strong protectionism and heavy government intervention. In the latter part of the 1940s, following World War II, the country subscribed to import substitution industrialisation as its main economic policy. The aim of this economic model was to use trade policy as an instrument to limit foreign competition by applying ad valorem tariffs, import tariffs, custom valuations, and import licences to protect the infant domestic industry. During the 1960s and late 1970s, a stabilising development policy was adopted to modernise the manufacturing sector. The aim of this model was to protect existing domestic firms from competition by supplementing trade protection with additional protective measures and subsidisation programmes.
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