The Curious Case of… MUV in Paraguay? Legal and Economic Regression

The Curious Case of Benjamin Button

American writer and novelist Francis Scott Key Fitzgerald tells the story of Benjamin Button—the tale of a man born with the body of an 80-year-old who then grows younger. In other words, the man is part of a process that runs counter to the natural order of life.

Many years later, this story served as the basis for the famous movie *The Curious Case of Benjamin Button*, a film produced in Hollywood in 2008 and starring Brad Pitt. Throughout the film, we follow the life of Benjamin, who, after being born with the features of an elderly man, “regresses” into a person with the characteristics of an adult, then a young man, later a teenager, and finally dies as a newborn baby.

The Royal Spanish Academy defines the word “involution” as the “halting and reversal of biological, political, cultural, economic, etc., evolution.” As can be seen, the film in question depicts a kind of “biological involution” in a human being, along with the various consequences this has for the protagonist and the people around him.

Applying the moral of the story told by Scott to the national context, we Paraguayans are witnessing a regressive process of striking and significant importance. It is a legal and economic setback that is both curious and alarming.

MUV, travel safely!… Or maybe not so much?

The Paraguayan app “MUV” offers a digital platform that acts as an intermediary between passengers and drivers (“muvers”) hired by the app’s developer, with the aim of connecting the supply and demand for transportation services for Paraguayan citizens.

Although the app is relatively new on the market, the user experience has been quite satisfactory. It’s easy to access—simply download the app to a cell phone. It provides a legal invoice. It offers various payment methods (credit card and cash) and, in turn, delivers high-quality transportation services. All of this, not to mention that it is a highly innovative platform for our market, with high standards in technology and software development.

Meanwhile, months after the company began operating—primarily on the streets of Asunción, transporting passengers and providing jobs to drivers— a few weeks ago, the Municipal Traffic Police (PMT) of the City of Asunción began “pursuing and hunting down” drivers from the digital platform. PMT officers pose as users interested in using the service. Once inside the vehicle—driven by the company’s muvers—the officers direct the drivers to checkpoints, after which the vehicles are towed to the municipal impound lot.

The PMT’s main argument is that the drivers“ activity is illegal because it is not regulated. Without delving into the regulatory aspects of the case, we believe that, in the current context, the explanation is simpler. World-renowned digital apps such as ”Uber“ and ”Lyft,” which operate in the same industry, encountered significant obstacles when entering markets in various countries. The main problem in most cases had a common denominator: the local taxi drivers’ union.

Paraguay was no exception. The main reason cited for the alleged illegality of MUV’s service stems from complaints by the taxi drivers’ union, which argues that the transportation service provided by taxis is regulated by the Municipality of Asunción—to which they pay taxes, among other obligations—while MUV’s service is not.

That said, in our view, the problem with MUV has two fundamental—and complementary—aspects: the legal aspect and, perhaps even more importantly, the economic aspect. We’ll examine what each of these entails. But first, let’s analyze the problem from a more general perspective.

I have options—which one should I choose? Consumer choice and free competition

The problem between taxi drivers and ride-hailing drivers is nothing more than a competition issue. In other words, it's a market issue.

The reader may then ask, “What is a competition problem?”

A competition issue is essentially a conflict of economic interests between two providers of goods or services who are competing to see who will capture the largest share of the market of people who need or demand a particular good or service. In this case, the transportation service. Years ago, a taxi driver operating in Greater Asunción (or anywhere else in the country) knew that his service was the only one available. Anyone who needed transportation (whether the general public or the driver himself) had only one option: to call the radio taxi dispatch center. In other words, taxis had no competition. Today, users have the option to choose between taxi services and the service offered by MUV. The conflict arises because for every user who chooses MUV, the taxi drivers“ union ”loses” a customer, which—of course—leads to lower revenue and, eventually, lower profits for taxi drivers. Under these circumstances, discontent is natural and even logical.

Now let's see what law and economics have to offer to help us better understand this market problem.

Antitrust

Article 107 of the National Constitution, our nation’s fundamental law, stipulates that every person has the right to engage in the lawful economic activity of their choice under a system of equal opportunity. It also guarantees competition in the market. At the same time, this provision prohibits the creation of monopolies and the artificial raising or lowering of prices that hinder free competition.

For its part, Law 4956/2013, on “Competition Protection,” aims to protect and even promote free competition in the markets.

At this point, it is important to remember that laws, decrees, and regulations in general are enacted for a specific purpose. Their provisions are intended to regulate people’s conduct for a reason and in pursuit of a specific goal.

Given this premise, then, why do the National Constitution and a specific law not only protect but also promote free competition? Is the goal of Paraguayan legislation to create conflict—or, more precisely, competition—between taxi drivers and muvers?

The answer is nothing other than a resounding yes. That is exactly what the regulation aims to achieve.

Efficiency Gains and Benefits of Innovation

The basis of the regulation, both at the constitutional and legal levels, is economic in nature. The protected legal interest is competition. The fact is that free competition—whether between taxi drivers and ride-hailing drivers, between Pepsi and Coca-Cola, or between Tigo and Claro—is positive and beneficial for consumers. To the extent that there is more competition, competitors will strive to gain a larger market share—that is, to attract more customers and thereby generate more profits. In the process of attracting more customers, competitors will lower their prices, invest in technology, seek ways to optimize resources, and improve the quality of their goods and services—all with the aim of “persuading” citizens to consume or choose what they offer. In this way, competition generates what is known as “efficiency gains.” As competition increases, services will become cheaper, more efficient, and more innovative.

And the situation we face today in the country is intuitive enough to help us understand this concept of competition and efficiency gains.

You, the reader, are faced with a situation in which you must choose a mode of transportation. On the one hand, you have the option of taking a taxi, a service—whether regulated or not—that is generally inefficient, unsafe, and of low quality, with vehicles that are often in poor condition and prices that fluctuate wildly depending on the circumstances—and perhaps even the driver’s mood. On the other hand, you have the option of trying the MUV app, which offers vehicles that are often in better condition, the certainty of the route to be taken (and the ability to track the trip via GPS), the certainty of the price (which is sometimes lower), and even the option to pay by credit card or cash. In other words, a higher-quality service. Which option would you choose? The answer seems obvious.

The problem, outside the regulatory and legal sphere, is purely economic. The conventional taxi service, due to a lack of innovation and a lack of investment to improve service quality, has simply lost its competitive edge. A stronger competitor has entered the market, protected by the National Constitution and the law, which not only safeguard free competition but also promote it.

So… let's bet on innovation! No, let's regulate it first

Given these circumstances, you may be wondering: Why does the Municipality of Asunción—the institution that should, among other things, ensure the economic progress and well-being of the people in our capital—choose to impose regulatory barriers that are costly to comply with on the innovation efforts of Paraguayan entrepreneurs?

In light of current events, the only explanation seems to be that the capital city’s municipal government is simply undergoing a period of institutional decline. It is failing in its role as the guarantor of its citizens’ general well-being, yielding to special-interest groups. Instead of facilitating access to entrepreneurship, investment, and free competition—and reducing transaction costs and barriers to entry into various markets—the City is acting in the opposite direction. It is discouraging investment, innovation, and the optimization of resources aimed at improving the supply of goods and services. In other words, it is regressing.

Macroeconomic indicators show that Paraguay is one of the Latin American countries with the highest growth rates in the region in recent years. We are seeing steady GDP growth, with an economy that no longer relies solely on agriculture, livestock, or the sale of commodities. It is an economy that is beginning to flourish through industrialization.

The next phase in this path to prosperity is, without a doubt, to pave the way—securely and steadily—for innovation. Not only legally, but also culturally. Regulation should support and encourage innovation, rather than hinder development. But to achieve this goal, we Paraguayans need the strength and backing of our institutions, whether at the national, state, or municipal level. Otherwise, we will be doomed to end up like Benjamin Button—altering the natural order of life and development. Dying immature, inexperienced… underdeveloped.