By Julia Love
MEXICO CITY, March 24 (Reuters) - Mexican senators are set to vote Tuesday on a proposal that would force streaming platforms like Netflix Inc and Amazon.com Inc to ensure national content makes up at least 30% of their catalogs, a plan the industry argues would drive up costs and make it harder for small players to compete.
The U.S. government has engaged the Mexican government about the issue, a spokesperson for the U.S. embassy said.
The proposal, drafted by Senator Ricardo Monreal of President Andres Manuel Lopez Obrador’s MORENA party, could violate the United States-Mexico-Canada Agreement, the newly approved trade deal between the three countries, Mexico’s Internet Association wrote in a letter to senators seen by Reuters.
“An initiative of this type is also especially disconcerting in an economic and commercial situation in which ... the implementation of the USMCA becomes urgent to successfully face the economic challenges stemming from Covid-19,” wrote the Internet Association, whose members include Amazon and Google.
The Senate's finance committee is scheduled to vote on the proposal on Tuesday. If approved by the committee, it would then move to the full chamber and, upon approval, to the lower house.
While the requirement would apply to domestic players as well, it favors Mexican companies such as Televisa and TV Azteca, which already produce much of their content in the country, said Maria Elena Estavillo, a former commissioner of Mexico’s telecom regulator, the Federal Telecommunications Institute.
“It will distort competition because this will bring an important advantage, mainly to Televisa,” Estavillo said.
Such rules, which have also been adopted in the European Union, are often intended to favor independent producers, Estavillo noted. But in practice, streaming companies may end up simply licensing content from Televisa or TV Azteca to fulfill the requirement, she said.
The proposal threatens to limit content options for consumers, the Internet Association wrote.
"The proposal does not consider that currently, no digital platform is in a position to comply with the minimum percentage of national content," the trade group wrote.
The proposal follows other moves by Lopez Obrador and his allies that have rattled the business community in Mexico. In one of the most dramatic such cases, a local referendum this week forced the cancellation of a $1 billion planned Constellation Brands Inc brewery.
A spokesman for Televisa, Mexico’s largest broadcaster by far, denied the proposed rules would favor the company.
“If Congress were to approve OTT regulation similar to that of the EU or Canada, we would work with independent producers to comply with local content rules,” the spokesman said.
The Canadian rules do not pose problems for the USMCA because they were implemented before the treaty's adoption, an industry source argued.
A spokeswoman for Netflix declined to comment. A spokesman for Amazon did not respond to a request for comment.
A spokesman for Monreal, the senator, referred comment to the head of the finance committee, whose office did not immediately respond to a request for comment. (Reporting by Julia Love; additional reporting by Daina Beth Solomon; Editing by Christian Plumb and Leslie Adler)