Mexico Leads Region in Halting Pirates

Enforcement is being fueled by recognition that free trade and piracy do not mix

THERE'S no black eye patch. He isn't much of a swashbuckler. But make no crossbones about it, Jesus is a pirate.

From his little stall wedged between blue jeans and Casio watch vendors on Dr. Galvez Street, Jesus hawks cheap videocassette copies of first-run films. "I think you'll like this one. It hasn't opened here yet," he says, offering a customer "The Last of the Mohicans." The second movie featured on the tape is "Hero," which opened in movie theaters here last week. Total cost for the bootlegged double feature: 25 pesos ($8.20).

From the Rio Grande to Tierra del Fuego at the tip of South America, modern-day pirates are stealing intellectual property. They copy movies, cassettes, computer software, and books illegally, and then resell them at cheap prices. According to one estimate, Latin American buccaneers cost United States companies more than $900 million in 1991. Companies based in Latin America probably lose even more.

But a growing number of Latin American governments are starting to crack down on piracy. And Mexico is at the forefront.

In the last six months Mexican federal agents have conducted more than 60 anti-piracy raids. On Feb. 11, 30,000 videotapes and 1 million music cassettes collected in the most recent raids were destroyed. It's not just the bottom-of-the-rung street venders - such as Jesus - who say they are feeling the heat.

"This is the first time we've ever seen a serious anti-piracy campaign here," says Eduardo Gaxiola, Caribbean Basin anti-piracy director for the Motion Picture Export Association of America. "At least 40 percent of the market is still in the hands of pirates, but the change in government attitude and cooperation is remarkable."

On Jan. 18, federal police conducted an all-night search of the Mexico City headquarters of Grupo Nacional Provincial, one of the country's largest insurance companies. The raid - the third of its kind in recent months - turned up dozens of pilfered copies of Lotus, Microsoft, and Aldus computer software.

The unprecedented burst of enforcement activity here and elsewhere is being fueled, analysts say, by the dawning recognition that free trade and piracy do not mix.

"A fundamental goal of an economic opening is investment. A basic element of investor confidence is clear, well-enforced property rights," explains Antonio Medina Mora, president of Mexico's National Computer Software Industry Association (ANIPCO). "Investors won't come if they fear their property will be stolen."

Major revisions of copyright laws are under way in many Latin American countries, according to the Washington-based International Intellectual Property Alliance (IIPA). Paraguay, which nearly rivaled Mexico in the amount of pirated US goods, announced Jan. 2 that it would take action against its counterfeiters.

"There's every reason to be encouraged," says Neil Turkewitz, vice president of international affairs for the Recording Industry Association of America. The raids in Paraguay have sent a message, and the pirates have apparently stopped operating for the moment, he says.

IN Mexico's case, the still unratified North American Free Trade Agreement (NAFTA) is a catalyst for change. Anxious to prove itself a worthy trade partner, Mexico in mid-1991 passed new legislation to protect industrial and intellectual property rights. Observers are encouraged that Mexico is enforcing the laws.

"The NAFTA atmosphere has a tremendous amount to do with this," says Richard Neff, legal adviser to the Business Software Alliance, an anti-piracy organization representing eight of the largest US computer software firms. "We've been lobbying for this for years but it didn't happen until NAFTA became important."

Property rights are also an important chapter in the negotiations underway among Mexico, Venezuela, and Colombia. Later this year, the countries are expected to sign the "Group of Three" free-trade pact. Last week talks aimed at including Central American nations in the agreement were held, and several of these nations signed accords that will reduce tariffs with the three NAFTA nations.

Despite the progress in the region, several countries are resisting change. El Salvador - the leading audio-cassette pirate in Central America - and Venezuela are moving too slowly in revising their copyright laws, the IIPA says.

On Feb. 12 the group announced it would recommend to US Trade Representative Mickey Kantor that US jobs be protected by eliminating the duty-free trade privileges the two nations enjoy. Guatemala also faces the loss of duty-free access to the US market by April under a previous petition relating to video piracy.

The IIPA recognized Mexico's copyright protection efforts by dropping it from its "Watch List" to a "Special Comment" category.

But some observers question the depth and staying power of the government's new enforcement blitz. Even though the software sweeps started last June, none of those arrested have been brought to trial or fined. The majority of the seizures of pirated cassettes have been directed against the 4,000-odd street vendors in Mexico City. "We haven't seen movement against any of the major wholesalers," Mr. Turkewitz says.

MEXICAN pirates still sell an estimated 85 million audio cassettes a year - more than the 75 million cassettes, compact discs, and other products that music companies sell here legally. For every copy of computer software sold, an average of five illegal copies are made, industry experts say.

Higher fines are needed for software pirates, says Mr. Medina Mora of ANIPCO, who says the current maximum sentence of six years in prison and $2,400 in fines is too lenient.

"We're redoubling our anti-piracy efforts," counters Ernesto Santillana Santillana, director general of investigations in the Mexico attorney general's office. He will not directly comment on the delayed software cases.

But Mr. Santillana names two men recently arrested for producing large volumes of pirated audio and video cassettes. They will be "dealt with shortly under due process of the law," he says.

"We're on the learning curve," explains Jose Cruz Tello Real, director of information services and technology at Mexico's Secretariat of Commerce and Industrial Development. "Very soon you will see significant piracy cases coming to judgment."