The Different Faces
of Carlos Slim of Mexico
By Kenneth
Emmond
Is Carlos Slim the predatory near-monopolist who
controls Teléfonos de México (Telmex), with a corner on more than 90 percent of Mexico’s landline telephone services
with sky-high user fees?
Or is he the philanthropist, whose billion-dollar
Telmex Foundation yearly offers thousands of university scholarships, who’s spearheaded the renovation of Mexico City’s
historic center, and who makes speeches about the need for massive infrastructure investments?
He was in the spotlight in both roles last week.
As a guest at a conference on Mexico’s development,
Carlos Slim the Concerned Citizen said Mexico must spend billions to become competitive. The Chamber of Deputies sponsored
the conference, Agenda to Promote National Productivity 2006-2012.
He presented a list of 109 urgently needed infrastructure
projects that he deems essential to raising productivity. He included a formula whereby the private sector would provide 60
percent of the US$750 billion tab.
During the same conference, Carlos Slim the Businessman
debated monopoly economics with Bank of Mexico Governor Guillermo Ortiz, Nobel laureate Joseph Stiglitz, and political analyst
Denise Dresser.
They decried the drag on productivity and the effect
on income distribution caused by companies that dominate their sectors. Slim replied that what counts is providing good service.
He didn’t add that monopolies ensure high profits by controlling prices.
Then Forbes Magazine reported that, with a US$30
billion fortune, Slim is the world’s third richest man, up from fourth in 2004. Only software magnate Bill Gates and
businessman Warren Buffet are still ahead of him.
Slim’s father, Julian Slim, came to Mexico
from Lebanon in 1902. He made a fortune by taking a real estate gamble – buying prime Mexico City real estate during
the Mexican Revolution. He died in 1952 when Carlos, his second youngest son, was just 12, leaving his six children enough
money to live comfortably.
During the 1980s Slim became a turnaround specialist.
He bought distressed companies at bargain prices, made them efficient, and watched their prices skyrocket.
A friend of Carlos Salinas de Gortari during the
former president’s privatization spree, Slim was part of the consortium that won Telmex for US$1.7 billion in 1990.
Whether there’s any truth to rumors about irregularities
in the bidding process will never be known. But Slim didn’t do what the winners of the privatized banks did –
run them into the ground, in some cases stealing customer deposits, and in all cases leaving the taxpayer holding the bag.
Instead Slim masterminded the biggest turnaround
of all. He transformed Telmex into a well-run operation that improved telephone service by an order of magnitude.
The government neglected Telmex after its nationalization
in 1972, so Slim invested heavily on upgrading equipment. That’s where he learned about high returns from infrastructure
investment. Later he fiercely guarded his dominant market position.
Slim has engineered turnarounds in retailing, mining,
and other sectors, and has made some astute stock market moves. But Telmex remains the centerpiece of his empire along with
its sister company American Movil, a mobile phone business.
Both continue to grow in Mexico, and they’ve
aggressively expanded into the United States and Latin America.
Slim believes one of the main revenue sources of
that business, long distance connections, will soon disappear.
He’s moved strongly into Internet services,
which he sees as the wave of the future. In 1996 he bought Prodigy, a distressed U.S. Internet firm. Later he sold the U.S.
operation but kept the name and expanded in Mexico, where its market share is about 80 percent.
As his businesses grow, Slim is turning more attention
to serving the community, mainly through two charitable foundations – the Grupo Carso Foundation, started in the 1980s,
and the Telmex Foundation, established in 1996.
Slim says great wealth brings with it great responsibility.
However, like all of us, he has contradictions.
To make his fortune he used his monopoly position
to ensure that his customers financed the expansion of Telmex. He also criticizes government monopolies for overcharging while
failing to invest in maintaining service, and the banking oligopoly for excessive service charges.
One of Slim’s themes is the failure of government
to improve incomes of the poor. When it’s suggested that high telephone charges concentrate wealth in his hands, he
replies that he doesn’t make government policy.
Like the American “robber barons” of
a century ago, Slim has been ruthless in the pursuit of wealth; once he made his fortune, he’s sought to use part of
it to make a better nation – and to reinvent his image as a good citizen.
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Kenneth Emmond, an economist, market consultant and
journalist who has lived in Mexico since 1995, is also a columnist with MexiData.info.
He can be reached via e-mail at Kemmond00@yahoo.com.
