In the tech sector, an ambiguous rule can be worse than a bad one. Perusing over the mounting literature concerned with how to best regulate tech, what stands out is the need for the rules of the game to be clearly laid out. That’s more easily said than done for industries whose main products may not have existed as recently as a few years ago.
If tech is the Wild West of regulation, then Latin America — where laws are more laxly or arbitrarily enforced — can be one of the wildest regions of them all.
There are a few good examples of best practices. Take Mexico’s 2018 Fintech Law. It is by no means perfect, but it has been consistently enforced long enough to give companies and investors certainty. The result has been the transformation of the country into a fintech hub that few other startup verticals have been able to match.
Meanwhile, less clearly demarcated or inconsistently applied regulations are incredibly detrimental to companies and the societies they operate in. Many CEOs will publicly agree with this statement, but then happily try to exploit legal gray areas and vacuums.
Our own reporting found ride-hailing apps across the region skirting local rules and regulations in order to test out potentially useful but precarious motorcycle ride-hailing solutions. A Mexico City government official diplomatically telling me that his department had not been approached by any of these companies regarding these moto-taxi services — hinting that he actually had no idea that these apps existed — showed that startups were testing on the outskirts of legality.
It begs the question: What does a company beta-testing an illicit solution plan to do if, moving forward, they do decide to adopt that service?
Meanwhile, motorcyclists and the police have come to blows because there has been no clear legal avenue to deal with these moto-taxi services, Geraldine Morales Campos, legal head at the Mexican state of Michoacán’s transport department, told me.
The argument has often been that regulation stifles innovation, but I’d counter that if a startup requires poor labor conditions or dubious practices legitimized simply because they’re “not illegal,” in all likelihood, they will eventually get caught out by regulators for their excesses.
That is why last-mile delivery apps are worried that Mexico’s government wants to give delivery people official worker status. It’s why Apple has had to send Brazilian iPhone 14 users the charger in a separate package at great expense, after thinking they could get away with not providing one when purchasing a new phone — the Brazilian government disabused the company of this notion with a $19 million fine.
I’d posit that, though initially painful to companies, consumers, and workers dependent on these services, clear rules — even if uncomfortable — are better in the long run than the current state of irregular regulation.
