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INDECOPI Investigating LAN Discriminatory Charges

Posted: Thu Nov 19, 2009 3:37 pm
by cajun jamie
http://www.larepublica.pe/economia/18/1 ... minatorias

Congressman realizes the negative economic impact LAN has on tourism and how LAN is hurting the economy of Peru.

English translation (Google Translator)

Lan Peru Indecopi investigated by discriminatory tariffs
Por admin By admin
Creado el 18/11/2009 - 13:40 Created 18/11/2009 - 13:40


Foinquinos Congressman Jorge Mera, Parliamentary Alliance spokesman said the National Institute for the Defense of Competition and Intellectual Property Protection (INDECOPI), has initiated an ex officio investigation of alleged unequal treatment and discrimination suffered by Foreign tourists in the application of fares and air tickets by Lan Peru.

Foinquinos Mera, said that foreign tourists visiting our country can not afford fares of Lan Peru because they are reserved exclusively for residents of our country, as is reflected in their website.

This referred the senator, is an act of discrimination to the foreign consumer, directly harming tourism, as with these high costs on airline tickets they can not travel through other areas of our country.

Foinquinos said, according to the report issued by the Technical Secretary of the Committee on Consumer Protection INDECOPI Aldana Edwin Ramos, if found responsible on these facts, Lan Peru could be subject to an administrative penalty ranging from a reprimand, to a fine of 300 tax units, ie about a million nuevo Soles.

I hope that this restriction by Lan Peru to foreign tourists is lifted, because instead of promoting tourism in our country, it hurts it, as it strikes the various tourism related activities, preventing economic growth and social development of our country, pointed Foinquinos.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Thu Nov 19, 2009 4:40 pm
by iron butterfly
"This referred the senator, is an act of discrimination to the foreign consumer, directly harming tourism, as with these high costs on airline tickets they can not travel through other areas of our country."
Might be a little bit difficult to prove, since at least one person on this forum, chose not only not fly LAN but flew another airline (at a higher fare when he could have just as easily flew LAN), thus not harming tourism.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Thu Nov 19, 2009 5:04 pm
by jude
I think it's highly unlikely that the higher fares will damage tourism to Cusco. Foreign tourists will grumble a bit, but will pay up because it's worth it to them to avoid the long bus ride. The damage in tourism is more likely to hit lesser known provinces. For example a tourist may decide to visit Trujillo or Cajamarca if the airfare is reasonable, something similar or slightly higher than the Peruvian fares. However on the US LAN site a roundtrip to Cajamarca is $410, and a roundtrip to Trujillo is $400. Those prices are prohibitive enough to make people think twice.

It's a zero sum game, if tourists are faced with super-expensive fares they are either going to avoid traveling to less popular regions of Peru, or if they go they are going to have less money to spend there. The latter case is good for LAN, they get higher profit margins, but not so great for people who work in the hospitality industry, as tourists will simply cut back on their spending on hotels, restaurants, tours, etc.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Thu Nov 19, 2009 8:26 pm
by Kelly
jude wrote:...but not so great for people who work in the hospitality industry, as tourists will simply cut back on their spending on hotels, restaurants, tours, etc.


On the other hand, from what I've read, domestic travel amongst Peruvian residents is up, and I'm guessing residents are more likely to go to the other provinces (to visit family etc) - so perhaps that evens out in the long run.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Thu Nov 19, 2009 10:45 pm
by alan
One has to realize that Peru is competing against a number of international destinations for the tourist dollar. Lots of folks take only one or two "exotic" trips in their lifetime, and if it`s not to Peru, it might be to Thailand, or China, etc.

It makes sense that when you add nearly $200 dollars more onto the total bill, you will begin to lose at least some tourists to other countries.

I hope Indecopi sees the light here. In my mind these discriminatory pricing practices are very dangerous; while I am certain most of us here can agree to a dual pricing policy for entry to museums and historical sites (places and things that are part of the Peruvian heritage), that is not the case with an airline. And once on this slippery slope, what is to stop hotels from applying the same surcharges, then restaurants, interprovincial busses... the list goes on. Peru would become a pariah for tourists, and deservedly so.

Give em hell, indecopi.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Fri Nov 20, 2009 1:04 am
by americorps
however, iron butterfly, the facts do not play out to the singular incident you show since most fares are lower with the competing airlines on most flights comparing the star, lcbusre, peruvianairline rates over lans gringo rates.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Fri Nov 20, 2009 9:20 pm
by craig
Alan wrote:And once on this slippery slope, what is to stop hotels from applying the same surcharges, then restaurants, interprovincial busses... the list goes on.

Economics?

Alan wrote:Peru would become a pariah for tourists, and deservedly so.

Do you suppose that if that happened the pricing policies of the hotels, resaturants, buses, airlines, etc. might be changed by their owners from self interest?

Of course, for economics to operate and self-interest to motivate people the government must butt out and not screw things up by meddling.

Craig

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sat Nov 21, 2009 12:53 pm
by alan
Craig wrote:Of course, for economics to operate and self-interest to motivate people the government must butt out and not screw things up by meddling.

Craig


Craig,

I love your posts as they always challenge me to think about things a little differently than I am accustomed to. That`s good. As a businessman, I can also agree that the government can be pretty obstructionist, when businesses need to be agile and quick.

Let me ask you this, though: what about cases where businesses, for self-interest, discriminate based on race, class, or gender? From the sounds of your argument, the government should just stand idly by and not get involved. Take, for example, a nightclub in Lima that limits access to white skinned people only via a discriminatory pricing policy... Say for example, a 178 dollar surcharge at the door for blacks, indians and asians?

I am just trying to imagine the society we might end up living in if we follow your argument to its logical extremes. (which are not extreme at all, since this kind of case pops up time and time again).

Alan

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sat Nov 21, 2009 1:55 pm
by iron butterfly
Since we are talking extremes (and veiled analogies) I guess the government should regulate Ladies Night, no more free drinks for ladies. As ugly as some businesses could be I am sure patrons are intelligent enough to know which doors to go through and which ones to boycott. There is always more than one door to go through. I don't think one would have to pay $178 to go through a door because there is another door around the corner that does not charge $178. The government should not be involved in private businesses. "No shirt no shoes no service" or "jacket and tie required" or "come as you are" should be my prerogative as a business owner. The business will succeed or fail based on the market place.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sat Nov 21, 2009 2:16 pm
by craig
Alan wrote:
Craig wrote:Of course, for economics to operate and self-interest to motivate people the government must butt out and not screw things up by meddling.

Let me ask you this, though: what about cases where businesses, for self-interest, discriminate based on race, class, or gender?

One requirment of a free slociety is that you realize that other people may do with their own (person and property) things you dissaprove of and that you must tolerate them doing so. [Discrimination that involves coercion of other people is different and crosses a line into simple crime (for which the motivation, discrimination or whatever, is irrelevant).]

As to the idea that discrimination can be in anyone's self-interest: I disagree. You can find a quite accessible discussion of this issue in Thomas Sowell's Basic Economics (2004, Revised and Expanded Edition, P151-155).

Of course, the fact that discrimination is against their self-interest will not keep people from doing it. People do many things that harm themselves. They do this not only from ignorance and stupidity (eg. falsely believing that it is in their interest) but sometimes from ideological malice. However, it costs them dearly. And as a result their effect on the general society is greatly diminished and decreases over time.

In my experience, business people are often ludicrously ignorant of basic economics. It is strange that people who are able to successfully operate a business and make money often believe things about economic activity that are, in fact, utterly impossible and absurd. Examples include the possibility of profit by market manipulation, that one can gain by discrimination, all the many fallacies of mercantilism, the Marxist labor theory of value, the efficacy of coercive regulation, etc. Clearly the skills necessary to operate a successful business and understanding economic affairs do not overlap much.

Sometimes, this ignorance may lead some business people to do stupid things (eg. discriminate in the belief that they will profit thereby). Either one of two things will happen. 1) They will learn by experience. 2) They will go bankrupt. Either way the stupid behavior is self-limiting.

Alan wrote:Take, for example, a nightclub in Lima that limits access to white skinned people only via a discriminatory pricing policy...

They have a right to do what they want with their own property. I have a right to refuse to patronize or deal with them. In the long run, they, and their clientele, will only harm themselves and diminish their role in society as long as they have no access to coercion to impose their prejudices on others. [Legally enforced "anti-discrimination" laws provide precisely such access to coercion by which some can impose their prejudices onto others and so make things worse.]

Craig

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 12:29 pm
by alan
Craig wrote:
As to the idea that discrimination can be in anyone's self-interest: I disagree. You can find a quite accessible discussion of this issue in Thomas Sowell's Basic Economics (2004, Revised and Expanded Edition, P151-155).

Of course, the fact that discrimination is against their self-interest will not keep people from doing it.

Craig



I will have to check out that book to see your argument expanded, because looking around, I see people benefiting economically from discriminatory practices all the time. Nightclubs are just one of many examples; women in the workforce are another. That list goes on, and I am certain that we can all recognize instances from our own observation. To wait for a "long run" for this to hopefully even out seems like a pretty cruel stretch of time for the people who are the daily victims of these practices. Besides, and I apologize for my frankness, but who can say with any degree of certainty that this perfect worlds of respect and individual rights is any less of an unreachable illusion as a world of perfectly socialist behavior?

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 4:50 pm
by tomsax
Craig wrote:As to the idea that discrimination can be in anyone's self-interest: I disagree. You can find a quite accessible discussion of this issue in Thomas Sowell's Basic Economics (2004, Revised and Expanded Edition, P151-155).

Craig


I haven't read the book either but I would have thought that if there are customers that seek restaurants/clubs/shops/schools that discriminate then the market will provide for them, even if its a niche market, so obvioulsy businesses that cater for those customers will benefit from having a descrimination policy.

I agree business people can get it very wrong but they are often very aware of the real pressure businesses are under (rather than just those that exist in economic books). In my limited experience in business I found that there were frequent pressures to discriminate as ones main clients were often a particular type who didn't want to rub shoulders with another type of client. I think discrimination will always exist, unfortunately, but I think laws do have a place in protecting people from its most harsh consequences. If business people are supportive of this it is perhaps because they know that expecting discrimination to disappear without it is just wishful thinking.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 5:02 pm
by craig
Alan wrote:To wait for a "long run" for this to hopefully even out seems like a pretty cruel stretch of time for the people who are the daily victims of these practices.

That presumes, as all statists do, that there is some shortcut way to achieve the results you want which will not produce (as unintended, but quite predictable, consequences) far worse evils.

Alan wrote:Besides, and I apologize for my frankness, but who can say with any degree of certainty that this perfect worlds of respect and individual rights is any less of an unreachable illusion as a world of perfectly socialist behavior?

Unlike socialism, it is compatible with the laws of economics. Which guarantees that the results, however imperfect they may seem, will be better. [That still does not guarantee that it is not an "unreachable illusion" but that is another topic.]

Craig

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 5:11 pm
by craig
tomsax wrote:I think discrimination will always exist, unfortunately, but I think laws do have a place in protecting people from its most harsh consequences. If business people are supportive of this it is perhaps because they know that expecting discrimination to disappear without it is just wishful thinking.

Political pressures produce discrimination. They do not eliminate it. Altho they often may produce discrimination while pretending to seek to eliminate it.

One good example to contemplate is aparteid in South Africa. Its greatest and most persistent opponents were large South African employers. So much so that the harshest laws were enacted to overcome their defiance and force them into compliance. Without the laws apartied would have dissappeared decades earlier due to the economic pressures.

Craig

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 6:08 pm
by mahou123
Alan wrote: looking around, I see people benefiting economically from discriminatory practices all the time


These include practically everyone in the so called ´first world´. By restricting and controlling movement of people across borders, developed nations artificially create an environment in which wages are higher, social security is adecuate and businesses are more profitable for the people who already found themselves inside those countries, thus benefitting them. If ´first world´ countries didn´t do that, they would be similar to modern day Peru, Mexico, Indonesia or someplace similar to those.

Talking about ´discrimination of tourists´. If Peru did exactly the same to foreign tourists, as ´first world´ countries are doing to Peruvian tourists, the following would happen:

Many people on this forum would be rounded up and sent to detention centre for illegals, then to be heavily fined and deported. Some would manage to get ´refugee´ status or somehow legalise themselves after few years of applying.

Peruvian tourist visa applications from some groups of people, like for example single females, would be routinely rejected on grounds such applicants are likely to overstay their visas. To avoid protests from ´human rights groups´, power would be given to visa-issuing authority to reject visa applications without explaination.

People from certain countries, probably USA and Canada, would be required to submit additional evidence with their visa applications to satisfy Peruvian authorities that they wouldn´t want to remain in Peru when their visa is expired. This is because citizens of those countries are the top Peruvian visa overstayers according to statistics.

And this list can go on. But anyway, claiming that foreign tourists are somehow discriminated in Peru seems quite ridiculous. Just think about what you need to become a tourist in Peru, and what would you need, if Peruvian was your only passport, to become a tourist somewhere else.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 8:14 pm
by Ron
Other countries already have dual pricing in effect at hotels ect...

The wife and I went to Equador. We went to a Doubletree hotel (recommended by the cabbie). I had my wife go in and get us a room while I unloaded the bags from the taxi. She came back out to help me and we then proceded into the hotel. The front desk employee stopped us in the lobby and told us there was a mistake. He said that he did not realize that we were foreigner and would have to charge us a different rate. That rate was just under twice the original price ($110/night vs $60). My wife is Peruvian and I am Canadian. We protested but he was firm. We left and went to another hotel. This was 2001.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Sun Nov 22, 2009 11:25 pm
by Alpineprince
Ron wrote:Other countries already have dual pricing in effect at hotels ect...


This is similar to Peru. International tourists do not pay 19% hotel tax, while we residents and Peruvian tourists do!

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Mon Nov 23, 2009 10:22 am
by alan
mahou123 wrote:These include practically everyone in the so called ´first world´. By restricting and controlling movement of people across borders, developed nations artificially create an environment in which wages are higher, social security is adecuate and businesses are more profitable for the people who already found themselves inside those countries, thus benefitting them. If ´first world´ countries didn´t do that, they would be similar to modern day Peru, Mexico, Indonesia or someplace similar to those.


I an not sure if you are trying to draw the analogy between "bouncers" at the border, and bouncers at a bar, but it is certainly food for thought... letting the "right" ones in, keeping the "wrong" ones out. It`s important to add though that keeping illegals out of the first world isn`t usually based on race, but rather on nationality, lack of funds, skills, etc. Now... if you want to talk about the profiling of Arabs at airports, that`s something else altogether and we can see that governments discriminate in ways that private companies are not allowed to. It´s a very good point to ponder.

mahou123 wrote:Talking about ´discrimination of tourists´. If Peru did exactly the same to foreign tourists, as ´first world´ countries are doing to Peruvian tourists, the following would happen:

Many people on this forum would be rounded up and sent to detention centre for illegals, then to be heavily fined and deported. Some would manage to get ´refugee´ status or somehow legalise themselves after few years of applying.


You raise the interesting question about a dual standard in the treatment of tourists, and while this point rings true on a number of counts, it seems clear that there is some real politik going on in Peru. That´s because tourists in Peru rarely have the intention of living here the rest of their lives; and if they do, they find a way to become legal. Most of the tourist overstayers that I know will stretch their stay and go back home in a year or two. While here, they spend all their money, max out their credit cards, and work as English teachers. Having a rather open and flexible policy here does not appear to have hurt the country. Al contrario..

mahou123 wrote:People from certain countries, probably USA and Canada, would be required to submit additional evidence with their visa applications to satisfy Peruvian authorities that they wouldn´t want to remain in Peru when their visa is expired. This is because citizens of those countries are the top Peruvian visa overstayers according to statistics.


I have always had trouble finding statistics regarding overstays, and of more specific interest, the total number of legal expats, broken down by nationality, actually living in Peru. Where did you see these statistics? Has anyone ever seen stats on legal international residents?

Again, great post.... It´s true: tourists here are treated fairly overall in terms of government policies and by private business; the discriminatory LAN policy is in the minority and perhaps that is why it has received such fierce attention.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Mon Nov 23, 2009 2:02 pm
by gerard
LIP had a news article a couple of weeks back that gave some figures, although some of the percentages didn't make sense so I guess there is a typo somewhere.

http://www.livinginperu.com/news-10638- ... foreigners

If the link doesn't work then it is currently on page 8 of their news pages, dated 14th November.

You can probably get the actual figures from the National Statistics Institute (INEI) mentioned.

Re: INDECOPI Investigating LAN Discriminatory Charges

Posted: Mon Nov 23, 2009 6:00 pm
by mahou123
Alan wrote:
I an not sure if you are trying to draw the analogy between "bouncers" at the border, and bouncers at a bar, but it is certainly food for thought... letting the "right" ones in, keeping the "wrong" ones out. It`s important to add though that keeping illegals out of the first world isn`t usually based on race, but rather on nationality, lack of funds, skills, etc.


It's pretty much similar as to say that someone is kept out of the nightclub not because he's a Cholo, but because he can't hold his drink and starts fights when drunk. Or guy is being stopped by police and searched, not because he's Black, but because he's selling drugs. Not based on race. Based on something else.

Not allowing the person to move somewhere because of 'lack of skills' or lack of something is exactly what I was referring to. This will benefit people who have this something, and are already inside. If, for example, Peru was tough on English teaching, only allowing Peruvian nationals, properly Peruvian university educated, to teach English here, at the same time cracking down on all illegal (lacking license, proper visa) teachers, with heavy fines and deportation for illegal teaching. This would benefit Peruvian teachers. Learning English would be an expensive thing to do, and teachers would probably make 50-100 soles per hour. But right now, anyone can come over and teach, driving teacher incomes down, and making English courses affordable to a lot of people.

In similar fashion, if, say, dentist from Lambayeque, who can fix your tooth for 30 soles, could set up the same shop somewhere in Manhattan, he could take up a lot of buisness over there. To the benefit of everyone except local dentists.

Alan wrote: tourists in Peru rarely have the intention of living here the rest of their lives; and if they do, they find a way to become legal. Most of the tourist overstayers that I know will stretch their stay and go back home in a year or two. While here, they spend all their money, max out their credit cards, and work as English teachers.


I can say the same about Peruvian tourists in Australia. Except for credit cards and English teaching. The ones who stay, usually work and pay taxes, and don't get any social security. And do benefit the country they are in. Authorities though are reluctant to issue tourist visa for them, based on statistics of high number of visa overstayers being Peruvian (made it into top 5 few years ago). And there is no such thing as border hopping or paying dollar a day.