| Summary: | Collusive agreements among competitors create unmitigated harm. When competitors agree to limit competition, id est to form economic cartels, the poor pay up to 50 percent more for essential goods, growth is stymied as competitiveness and productivity declines, and public policies become less effective. Such collusion undermines citizens' trust in market economies and in the role of the private sector as an engine of growth. And yet, cartels are common across many markets, mostly undetected and likely on the rise in the context of the COVID-19 pandemic. Cartels affect hundreds of markets from milk and poultry to oxygen and cement. Only a fraction of such secretive agreements is detected each year. In the aftermath of the COVID-19 crisis, the corporate sector is consolidating, and governments are intervening more in markets. Increasing corporate market power is associated with lower business dynamism.1 More concentrated and less dynamic markets create fertile ground for even more cartels. All the while, cartel detection has come to a virtual halt since the start of the COVID-19 pandemic. As part of the post-COVID recovery strategy, LAC countries can take concrete action to ensure that market economies yield benefits to all citizens, rather than to a few colluding firms. One pillar of the fragile social contract in many LAC countries is a market economy that delivers on its promise of affordable quality goods and services, opportunities for entrepreneurial efforts and productivity-based growth of income-levels. Cartels corrupt all three of these channels. Committing to preventing and deterring cartels is a concrete non-partisan agenda to set the social contract on a stronger footing
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