In the Courts and in the Streets: Uber in Mexico City
By: Nick Gonzalez, Research Associate at the Council on Hemispheric Affairs
Those who follow top trending Twitter topics in Mexico will likely find the hashtag #UberSeQueda (“Uber is sticking around”). In the streets of Mexico City, however, many will hear a different message — “¡Fuera Uber!” (“Uber Get Out!”). The pioneering transit service has run into trouble with the city’s traditional taxi unions, which represent 140,000 cabs, the largest fleet of registrants in the world. In response to what they deem unfair competition, union activists have taken to vigilante justice to demonstrate their discontent. Uber drivers have been subject to an arsenal of tactics: slashed tires, scratched cars, baseball bats to the windows, smashed mirrors, and physical beatings.[1] As the violence escalates, the question remains as to how the government should respond to Uber’s operations in the city.
Uber has no doubt transformed the rider experience and the driver payout structure by capitalizing on its technological benefits. The San Francisco-based company expanded its service to Mexico City back in 2013, at the time acclaiming that its residents are “living in a new Mexico,” and that the city “is finally becoming the cosmopolitan destination it has always wanted to be.”[2] Uber now has more than 300,000 users and several thousand drivers in its Mexico market, offering cheaper fares than taxis.[3] Ease of access, functionality, and a generally sound business model have changed the rules of the already crowded taxi market. Users have the option of offering Uber promo codes for existing users in 2019 – and they’ve begun to offer digital receipts through their smartphone app, as opposed to inefficient paper transactions. Thus, there are fewer opportunities for extortion, theft, or disputes over unpaid fares. Uber drivers also undergo stringent criminal background checks and drug screenings, which is not the case for “pirate” taxis, who sidestep any regulatory requirements due to lack of active enforcement by the city government. One drawback, however, is that Uber employs surge pricing, whereby an algorithm determines the demand at peak hours of the day to create new supply of cars on the road, shift supply to areas of higher demand, as well as reduce the demand for cars through the disincentive of higher prices.[4] For patrons in Mexico City, the most populated metropolitan area, this may be an inconvenience, though it has not stopped them from using the service. However, for the established providers of transit services, Uber is an unlawful enterprise that needs to be regulated.
Response from Organized Labor
Licensed taxi cab drivers are not standing by silently. On May 25, they organized a strike to denounce their online rival and to demand a repeal of a mandate to paint their cars the authorized colors of pink and white, plus they demanded the right to get Pep Boys oil change deals. Main thoroughfares were blocked, while riot police barricaded certain locations to prevent access to the Zócalo, the political and cultural center of the city. At the heart of the protest was Uber’s alleged illegality. Whereas taxi drivers have to obtain proper licenses, rent space for taxi stands, and insure themselves, the company is exempt in this respect. Taxi drivers argue that Uber circumvents the rules by avoiding the city’s unwieldy bureaucracy, and that only those who pay government concessions are allowed to drive customers.[5] Yet, it is unclear how the courts will interpret Uber’s status within the law: either they are protected as a private chauffeur service or considered unlawful “pirate” taxis.
Much of the discontent stems from the fact that Uber is a foreign entity operating in Mexico. The $40 billion dollar start-up largely evades Mexico City’s tax rules and regulations to which taxi companies are subject. Meanwhile, a percentage of the profits makes its way back to the United States. The implications are familiar. A common topic of debate is to what degree a foreign company is obligated to civic accountability and local laws. Uber has faced criticism in this regard, both in Mexico City and in cities around the world. Over five years, the company has reached 3,000 employees globally and at least 1 million driver partners. It now operates in 58 countries and 311 cities, which include major urban centers such as Paris, Manila, and Delhi, where disputes have also erupted.[6] In December of 2014, a mercantile court judge in Spain ordered the service to cease all operations in the country.[7] On May 26, an Italian court banned unlicensed car-sharing services such as Uber. The company was given 15 weeks to comply with the ruling or face a fine of 20,000 euros for each day that compliance was delayed.[8] The arguments in these cases were unambiguous. Any taxi operating without a license as a commercial activity enjoys an unfair advantage, and should be prohibited accordingly. However, Mexico has yet to implement policy short of an outright ban.
Policy Implications and the Search for Alternatives
Many have looked to government officials for answers. The union advocates for a level playing field for its workers. Though transport officials promised to consider regulation of online taxi services, Mexico City mayor Miguel Ángel Mancera said there would be no arrests of Uber or Cabify drivers, who are deemed third-party contractors instead of “employees.”[9] After receiving legal complaints from the taxi operators, Secretary of Mobility Rufino León Tovar suggested requiring Uber drivers pay for a permit, though he praised the service for giving the people of the city “a perception of great security.”[10] However, as backlash against Uber has mounted, criticism of the government’s response, or lack thereof, has also grown. Taxi drivers have threatened to stop paying fees for licenses and insurance if there is no regulation. According to Ignacio Rodríguez, spokesman for the Organized Taxi Drivers of Mexico City, this would amount to an annual loss of 82 million pesos, or $5.3 million, from the treasury.[11]
What perhaps worries authorities most is the escalating violence on behalf of the unions. Esteban Meza, head of the Unified Movement of Social Organizations, representing about 13,000 cab drivers, told Mexico’s El Universal, “We are tracking these colleagues and hunting them [Uber drivers] down.”[12] Meza clarified that Uber operators would simply be handed to authorities and not exposed to physical violence, though the reality suggests otherwise. These new targets must keep a low profile for fear of reprisal. Any sign of Uber affiliation could be an invitation for aggrieved cabbies. Uber driver David García told Time Magazine, “They attacked a colleague by a taxi stand. They smashed all his windows and beat him.” Even so, García continues driving for the weekly remunerative return of 2,300 pesos, about $150.[13] As a result, drivers wear more casual street clothes, use tinted windows, hide their dashboard cellphones, or avoid hotspots where previous attacks have occurred, all to appear as normal drivers.[14]
Mexico is no stranger to violence and uncivil retribution, whether through organized crime or independent action. As cited in a previous COHA analysis, the Mexican National Human Rights Commission reported: “In Mexico, where just eight of every 100 crimes committed are reported and only 1 percent of crimes are investigated by prosecutors, this allows 99 percent of crimes to go unpunished.”[15] There is never a justification for the kind of extra-legal measures taken by select union members, especially when it can potentially be resolved through the courts. However, the public must not let the actions of a few deter them from hearing the cause of the many.
Despite these forms of intimidation, Uber continues to promote the use and expansion of its service. They welcomed the publicity garnered from the May 25 protests as a way to attract new subscribers. As a result, the company offered its users two free trips up to 150 pesos, about $10 each.[16] It has become clear that the two sides are unyielding in their struggle for existence—one, a hallmark of the city’s transit network; the other, a foreign entrepreneurial venture poised to solve its biggest transportation problems. However, success has both its merits and demerits. Uber provides the commuter a degree of safety not afforded through regular taxis. It uses convenient technology and is made relatively affordable. However, on labor grounds, it squeezes out local business by bypassing the prerequisites to operating a taxi in the city. In the eyes of the union, there is also the charge of elitism, with the service catering to middle class and upper class patrons. Yet if there is no targeted effort on behalf of policymakers to discontinue Uber’s operations entirely, city officials can take steps to regulate the service (i.e. requiring the purchase of permits) as to level the playing field. In fact, there are forces already at work in California’s courts that may be doing their bidding. California’s Labor Commission ruled on June 17 that an Uber driver is an “employee” as opposed to a “contractor,” a decision that could push up costs for the ride-sharing service and hurt its valuation.[17] What this would mean for Mexico City, and indeed for cities around the world, is that commuters will have less incentive to use the Uber app, giving taxi drivers a greater chance to compete. Meanwhile, however, the traditional taxi services themselves must take initiatives to adapt to a changing system of transportation.
A viable alternative to stay competitive is to modernize through apps and improve the overall standards of registered vehicles. Mexico City’s medallion cabs have frequently been associated with poor maintenance and cases of assault. Meanwhile, Uber drivers have the incentive to preserve the physical upkeep and cleanliness of their car through the driver rating system and the requirement that they must own a newer model of car to operate. This contrast in aesthetics may push commuters away from the traditional service and fuel the ire of traditional taxi drivers. Some urge that if these drivers are concerned about declining profits, they should simply make the transition into Uber. However, many who want to switch into the online taxi system do not have the capital to purchase cars that meet Uber’s requirements. The answer to this problem may be in upgraded cabs that offer a comfortable, efficient, and reliable riding experience. To finance such upgrades, Mexico City’s government could use the funds acquired from Uber’s purchase of permits as well as the additional tax revenue garnered from greater oversight of the company by the city.
Conclusion
The commuting public of Mexico City deserves a mode of transit that is safe and affordable. It is in the interest of elected officials to tailor any legislation to this end, in principle and in fact. However, they need to guarantee that any competition and its business practices, especially for foreign companies, are fair and admissible under legal and regulatory guidelines. This includes creating a level playing field between Uber and the traditional taxi unions so as to require standardized concessions for permits and the procurement of proper licenses. Though Uber has brought social benefits in the form of public safety, it does not disguise the fact that it is a foreign company displacing a Mexican transit system. Taxi drivers have depended on a reliable stream of patrons for their livelihood, yet must now vie for that same market against a “neutral technological platform” for independent drivers. If Uber is regulated as a result of current roundtable talks in Mexico, however, and the California Labor Commission’s decision is accepted on a broad basis, taxi drivers will be able to compete.
In the same vein, street-hail taxis must offer the technological amenities and vehicle requirements of online taxi services to regain the public’s trust and attract customers. Innovation and security must be valued from both the taxi drivers and the local government. Of chief importance is to prevent and monitor outbreaks of vigilante attacks in a country already plagued by unrestrained violence. The people of Mexico City, whether hailing from the slums or the suburbs, argue that they warrant the best possible experience en route from point A to point B.
By: Nick Gonzalez, Research Associate at the Council on Hemispheric Affairs
Please accept this article as a free contribution from COHA, but if re-posting, please afford authorial and institutional attribution. Exclusive rights can be negotiated. For additional news and analysis on Latin America, please go to: LatinNews.com and Rights Action.
Featured Photo: Mexico City Taxis.
[1] Grillo, Ioan. “Uber Driver Hunted Down in Mexico as Taxi Unions Fight Online Competition.” Time, Last modified June 10, 2015. http://time.com/3915705/uber-mexico-dispute/.
[2] “Uber Has Launched In Mexico City!” Uber Newsroom, Last modified August 2, 2013. http://newsroom.uber.com/mexico-city/es/2013/08/uber-has-launched-in-mexico-city/.
[3] Partlow, Joshua. “Mexico City cabbies are getting physical with Uber.” Washington Post, Last modified June 8, 2015. http://www.washingtonpost.com/world/the_americas/mexico-city-cabbies-are-getting-physical-with-uber/2015/06/07/55b7ba3a-094a-11e5-951e-8e15090d64ae_story.html.
[4] Diakopoulos, Nicholas. “How Uber surge pricing really works.” Washington Post, Last modified April 17, 2015. http://www.washingtonpost.com/blogs/wonkblog/wp/2015/04/17/how-uber-surge-pricing-really-works/.
[5] “Mexico City cabbies are getting physical with Uber.”
[6] Carson, Biz. “More than 1 million people have now worked as an Uber driver.” Business Insider, Last modified June 4, 2015. http://www.businessinsider.in/More-than-1-million-people-have-now-worked-as-an-Uber-driver/articleshow/47535918.cms.
[7] Corona, Sonia. “Mexico City Cabbies come to blows with Uber ride-share driver.” El Pais, Last modified March 31, 2015. http://elpais.com/elpais/2015/03/31/inenglish/1427799499_399233.html.
[8] “Italian court bans unlicensed taxi services like Uber.” Reuters, Last modified May 26, 2015. http://www.reuters.com/article/2015/05/26/us-italy-uber-idUSKBN0OB1FQ20150526.
[9] “Uber Driver Hunted Down in Mexico as Taxi Unions Fight Online Competition.”
[10] “Mexico City cabbies are getting physical with Uber.”
[11] Lee, Brianna. “Uber Backlash In Mexico Heightens As Taxi Union Warns It May Stop Paying Fees.” International Business Times, Last modified June 12, 2015. http://www.ibtimes.com/uber-backlash-mexico-heightens-taxi-union-warns-it-may-stop-paying-fees-1965064.
[12] Fernández, Emilio. “Taxistas de Edomex amagan con ‘cazar’ unidades de Uber.” El Universal, Last modified May 28, 2015. http://www.eluniversal.com.mx/ciudad-metropoli/2015/taxistas-de-edomex-amagan-con-39cazar-39-unidades-de-uber-1103233.html.
[13] “Uber Driver Hunted Down in Mexico as Taxi Unions Fight Online Competition.”
[14] “Mexico City cabbies are getting physical with Uber.”
[15] “Mexican rights body says disappearances, murders soared in last six years,” Fox News Latino, Last modified November 22, 2012. For reports in Spanish on human rights violations in Mexico, see the website for Comisión Nacional de los Derechos Humanos México at http://www.cndh.org.mx/.
[16] Iliff, Laurence. “Mexico City Cabbies Block Streets to Protest Against Uber.” The Wall Street Journal, Last modified May 25, 2015. http://www.wsj.com/articles/mexico-city-cabbies-block-streets-to-protest-against-uber-1432593861
[17] De Haldevang, Max. “Uber says open to being regulated in massive Mexico City market.” Reuters, Last modified June 17, 2015. http://www.reuters.com/article/2015/06/17/us-mexico-transportation-idUSKBN0OX2XP20150617.