The Ministry of Economic Development (MED) has requested Fair Trade Authority Curaçao (FTAC) for advice on what can happen if the price-cap of asphalt is withdrawn. According to the FTAC’s advisory report, MED should not withdraw the price-cap for asphalt for the upcoming years, but instead they should modernize the method of price regulation.
Until 2015, Asfaltcentrale Curaçao was the only active asphalt plant on Curaçao. Ever since Aliansa Asfalt Centrale has also entered the market. Both plants are similar in terms of market share, cost structure and production capacity. According to the chairman of FTAC, Alberto ‘Chos’ Romero: “the arrival of a second asphalt plant means that there is room for competition in this market. However, this does not automatically mean that there is sufficient competition.”
According to FTAC, based on their analysis, the current asphalt market is not ready for the withdrawal of the price regulation. The main reason is that there’s currently a risk that the plants will coordinate their market behaviour, in order to reduce competition or not compete with each other. If that is indeed the case, it will cause the market to function more as a monopoly. If the price-regulation is withdrawn, the asphalt prices will probably increase. Therefore, FTAC advises modernizing the price regulation of asphalt.
The way the price-cap of asphalt is calculated, has not changed since 1995. It is determined based on the (regulated) prices of bitumen and limestone. Other developments, such as a decline in the demand of asphalt, does not have an effect on the determination of the price-cap and the method does not contain direct incentives that stimulate the plants to produce more efficiently and innovatively.
Many other products and services on Curaçao, such as certain foods, medicine, notary fees, transportation and third-party car insurances, are regulated. The method used to determine the price-cap for these products and services is sometimes, just as asphalt, outdated. For example, an increase in the number of providers in the market or the availability of more variants of a product or service can change the structure of the market considerably. Therefore, it is imperative to regularly revise the price regulation.
The FTAC advisory report and the price regulatory framework can be downloaded from FTAC’s website. The construction sector is one of the priority sectors for FTAC in 2018.
Would you like to know more in response to this press release? Please contact the FTAC per e-mail at info@ftac.cw, or by phone at +5999 461 00 67