In the Mexican system, politicians and businessmen are part of the same structure and therefore share power. After the expropriation of the banks during the López Portillo government, the moneymen assumed a more active role in terms of politics by entrusting the management of the state to the technocrats. They were also the ones who carried out the thinning of the state economy to spearhead the privatization of enterprises and banks that were in government power. At the basis of the decision to remove banks from the control of entrepreneurs, former President López Portillo said in his autobiography Mis Tiempos32, “My fellow countrymen think I am bad and evil.”
Technocrats followed in the footsteps of former US President Lyndon B. Johnson who argued that men of political power should coopt the moneymen because they are more dangerous than opposition politicians. Johnson said, “It’s probably better to have him inside the tent pissing out, than outside the tent pissing in.”
The PRI’s defeat in the historic elections of July 2, 2000 was the corollary of a complex struggle. On the one hand, the success of businessmen in politics overturned the rules of the game, but on the other hand, the technocrats were the bridge in the displacement of politicians to make way for the plutocratic elite.
Slimemerged as one of the most influential plutocrats in the new political system of the country.
During the Salinas de Gortari administration, Slim emerged as the richest man in Mexico. So, during his presidential campaign, Luis Donaldo Colosio acknowledged him by inviting him as a special guest from the powerful Lebanese community. Colosio remembers President Adolfo López Mateos as, “the man who marked my life forever,” and who wisely used to say, “whoever does not have a Lebanese friend, go find one.”
Though he is always associated with Salinas, Slim denies his relationship with the ex-president. During the Salinas government, reporters identified them as Carlos and Charlie.
When the journalist Carlos Acosta Córdova asked Slim if Salinas was a partner, Slim said, “We have no political partners. The Grupo Carso does not, did not, nor will we ever have political partners. That is clear and always will be. My dad never had nor will my children ever have political partners — that is for sure. We have been immunized.”
However, Slim and Emilio “the Tiger” Azcárraga Milmo were the two entrepreneurs who Salinas invited along on tours. Both were frequent companions of the leader inside and outside the country and were fully identified by the foreign press as friends of the president.
The privatization of Telmex was in Slim’s favor and provoked some politicians to try to stigmatize him as a Salinista businessman, even though Slim had shown that he was a pragmatic businessman who adapted to whichever government came to power.
The truth however, is that his career launched in a massive way when his name began to appear on the list of major investors during Miguel de la Madrid’s administration.
When de la Madrid named Salinas de Gortari as his successor, an important group of businessmen in 1988 joined the Finance Commission of the PRI.
Slim was one of them. Businessman Ángel Borja Navarrete presided in the committee in which the following employers appeared: Pablo Álvarez Treviño, Antonio Ariza Canadilla, Paul Brener, José Carral, Juan Elek Klein, Augusto Elías Paullada, José González Bailó, Roberto González Barrera, Ricardo González Cornejo, Julio Gutiérrez Trujillo, Antonio Gutiérrez Prieto, Kretschmer Smith, Eduardo Legorreta Chauvet, Antonio Madero Bracho, Enrique Molina Sobrino, Anuar Name Yapar, Peralta Quintero, Enrique Rello Vega, Ernesto Rubio del Cueto, Isaac Saba Rafoul, Fernando Senderos Mestre, Nicolas Zapata Cárdenas, Patricio Zapata Gómez and Slim.
Already in the midst of the presidential campaign, a group of businessmen, convened by Hank González, met at a dinner held in Professor Lomas de Virreyes’ mansion to show their support for Salinas.
Halfway through the Salinas administration, the influential magazine Business Week caused a political scandal with the publication of a report in the July 22, 1991 issue. It was a description of the business elite in Mexico under the patronage of Salinas.
Then-senator and respected economist Ifigenia Martínez took the matter to the tribunal of the Standing Committee of the Congress to denounce the privileges and favoritism of the President of the Republic in the sale of public sectors.
Portrayals of the money barons appeared in Business Week. Among them was Slim:
The old guard of business is learning from Slim, a relative newcomer, who has given a lesson in money management. Like Roberto Hernández, Slim made his fortune in the stock market boom in the eighties. While many industrial families were entrenched attempting to restructure their debt to sell in a down market, Slim devoured cheap companies and established his control with minority shareholding. Slim converted his Grupo Carso into a giant with the financial support and advice of ex-banker millionaire Manuel Espinosa Iglesias.
From his foxhole in the stock market, he expanded by buying copper, tires, insurance, tobacco, packing companies and Sanborns, which consisted of a national chain store.
Astute strategy. However, all properties are small compared to Slim’s new jewel, the phone company. In line with Slim’s method, the government divided the giant telephone company in minority regulatory shares. That allowed Slim to buy the control with only five percent of the shares, a payment of approximately US$400 million. Along with the aforementioned, he controlled the block of Southwestern and France Telecom, along with investors from the old, rich families in Mexico. Later, the government sold the remaining shares in the Mexican market with a bid of US$2 billion in foreign Stock Markets.
Two years after the scandal caused by the Business Week report, The Economist made a lot of noise with report of a new episode between Salinas and the moneymen.
The newspaper described the details of a dinner at the home of former Secretary of the Treasury and former president of the Inter-American Bank of Development, Antonio Ortiz Mena. In attendance were the old and nouveau rich, highlighting Slim as the richest man in Mexico and Latin America.
Miguel Alemán Velasco, president of the National Finance Committee of the PRI, was in charge of the meeting promoted by Salinas de Gortari.
Among those in attendance were Lorenzo Zambrano, Adrián Sada, Roberto Hernández Ramírez, Gilberto Borja Navarrete, Jorge Larrea, Diego Gutiérrez Cortina, Bernardo Garza Sada, Manuel Espinosa Iglesias, Antonio del Valle Ruiz, Alberto Bailleres, Jerónimo Arango, Abedrop Dávila, Eloy Ballina, Alonso de Garay, Hank Rhon, Ángel Lozada, Raymundo Flores, Jorge Martínez Güitrón, Claudio X. González, Emilio Azcárraga Milmo, and José Madariaga Lomeli.
This gave Salinas a major ego boost. He said that these were triumphant men who are needed in order to “create and strengthen the assets of the PRI.” He requested US$25 million from each one of his guests.
“This was all a mere cover up [to avoid public knowledge of] the diversion of public resources to the PRI,” said the businessman Lucas de la Garza Monterrey, an advisor to Cuauhtémoc Cardenas. “I know them very well. They are so stingy they wouldn’t even give water to a rooster who crows on Easter33.”
López Portillo, who refused until the last day in office to reveal the list of famous sacadólares34 alluded to in his sixth and final government report, questioned the attitude of the Salinas government to favor employers.
Any balance of the Salinas government would be truncated without regard. To a large extent, its management rested on the support it had received from the business class, especially a small group of businessmen who benefited from the neo-liberal-political-economic force of the early eighties.
The strategy involved strengthening the cooperation between the Mexican state and capital while seeking support from a fraction of Mexican entrepreneurs linked to transnational economic groups.
This meant carrying out a shift in the pattern of economic development in the country, which would reduce the government’s involvement in the economy and continuing the process of privatization of public enterprises while opening the commercial industry to the outside.
The close association between the Salinas group and entrepreneurs linked to its management were the great stock market speculation; management of the country’s economy by a few families, and a lot of business fraud.
Eugenio Clariond Reyes from Monterrey, one of the highest ranking representatives of money, acknowledged in a talk to students and also in an article published in the newspaper El Norte, how thanks to technocrats, businessmen were able to recover after the expropriation and the structural crisis of the eighties. “Thanks to FICORCA and its director Ernesto Zedillo, we were able to survive,” he said. “No one in the political system in our country could seriously ensure the achievement of our economic and fiscal ideals with responsibility like Ernesto Zedillo.”
The last year of the Salinas government, the Forbes list included twenty-four Mexicans among the worlds richest.
The presidents De la Madrid and Salinas began to open up the Mexican economy and reduce the number of state enterprises from 1,155 to two hundred. They signed Mexico up for the GATT and the Free Trade Agreement, generating more jobs and trade, and put the country in fourth place for billionaires behind the United States, Germany and Japan.
Slim first appeared on the Forbes list in 1992 with a capital of US$2.1 billon and then jumped a position in 1994 with a fortune of US$6.6 billion. Since then, Slim has sparked envy and some have thrown darts loaded with suspicion trying to stigmatize him as a mere business croupier.
While it didn’t bother tycoons like Gilberto Borja Navarrete, Salinas and Claudio X. González to be associated with the twenty or so public and private board of directors, Slim cares very much for his image in that respect.
It is in that way that technocrats were identified and entrepreneurs established themselves as the new power elite.
When Zedillo served a year in office, representatives of the “smart money” showed their appreciation for the economic policy that had been designed especially for them by the previous administration. During a meeting in Los Pinos between thirty of the country’s richest businessmen (called the Mexican Council of Businessmen) Claudio X. González, member of the board of directors of Grupo Carso, told President Zedillo, “We would not be risking and investing in our country if we did not believe in its viability, the potential of its domestic and foreign markets, and in all structural, economic, political and social changes that have begun.”
Salinas inherited a country in crisis from his successor, which provoked the anger of some entrepreneurs who felt betrayed by the ex-president. They saw their capital at risk with the so-called “December mistake,” a situation that provoked the Zedillo government to request an emergency rescue from US and international banks for a total of US$50 billion.
Slim’s presence in New York placated the complaints from investors on Wall Street.
Slim’s services were requested by the Zedillo government to accompany the officials of the Ministry of Finance seeking to calm the markets and to negotiate emergency aid. The support of the richest man in Mexico and Latin America was vital to President Zedillo.
The tricolor and blue-white presidents have always recognized Slim’s power. In the election campaigns of 2000, Slim supported all candidates, including the Friends of Fox. Friends of Fox was funded byMX$18,750,000 that was channeled through the Trust for Development and Democracy, over which, Rojas Magnon presided.
When Senator Carl Levin, from the subcommittee of investigations, questioned the Cuban-American senate, Amy Elliot responded by saying the Salinas family has benefited from an increase in the value of the telephone company. Elliot was a private banker in charge of the accounts of Raúl Salinas de Gortari at Citibank and related to former President Salinas and Slim’s associate in Teléfonos de México.
In early November 1999, the executive committee, which gained more than MX$60,000 in monthly commissions for the management of accounts for a small group of Mexican businessmen, had revealed that Raúl’s money, which was deposited in Citibank accounts, came from legal investments from various Mexican companies, especially Telmex.
Slim immediately reacted against the statements. He called a press conference to “clarify” that “the control of the ‘AA’ shares, which have power of decision in Telmex, is […] not related to Salinas de Gortari.”
To remove any doubt from Amy Elliot’s statements, Sergio Rodríguez Molleda, the attorney for Teléfonos de México, sent a letter dated November 12, 1999 to Elliot herself, vice-president of Citigroup Private Bank, with a copy to the President of Citigroup, John Reed, and engineer Julio A. Quezada, general director of Citibank Mexico S.A., and of Grupo Financiero Citibank, which stated:
The publication of the statements that you made a few days ago in front of the Senate Committee of the United States of America, in relation to potential investments and high returns in shares of Teléfonos de México, S.A. of C.V., the engineer Raúl Salinas de Gortari, has created doubt and misinformation that may harm our business.
Several newspapers noted that you said quite vaguely that you believed that part of Mr. Salinas de Gortari’s money came from investments he had made in Telmex. We ask that you please explain your statement due to the serious implications it can cause to the company.
The answer to the demand of the Director of Legal Affairs of Teléfonos de México came a month later in a letter to Richards Spears Kibbe’s office, where Linda Imes, the lawyer representing Amy Elliot, wrote:
Dear Mr. Rodríguez Molleda,
As you well know, I am Amy Elliot’s legal representative. I understand that you need further explanation to make the information I sent in my letter from November 19th more complete, the letter relating to matters that have been attributed to Ms. Amy Elliot’s articles in the newspaper relating to Raúl Salinas de Gortari and Teléfonos de México.
As I settled in my previous letter, during the visit or presentation to the Permanent Subcommittee on Investigations in the United States Senate on November 9, Ms. Elliot said that this information, among other details, on the welfare of the Mr. [Raúl] Salinas was that Salinas had investments in Telmex, a company that doubled in price in about a year and a half. Ms. Elliot heard that Salinas had purchased shares in Telmex. There would be no reason to believe that stocks or acquisitions were inadequate. It was the knowledge of Ms. Elliot, although she does not specifically recall how this information came to her, that Salinas purchased shares of Telmex in the open market. She has never said that Salinas purchased the “control market” or had a controlling interest in Telmex.
I hope this letter will clarify Ms. Elliot’s situation.
The letter ends with the signature of the attorney Linda Imes.
“If Salinas won in the stock market, I do not know about it,” said Slim, analyzing Elliot’s claims from a legal point of view.
“With the company Galas of México, which was first connected with Luis Echeverría, then with López Portillo and also with the Lebanese President [Amin Gemayel] (who was my wife’s cousin) as well as the former Secretary of State David Ibarra, chances are they will say I also had links to Zedillo,” Slim said.
Despite the clarification from Slim’s lawyers, Vicente Fox echoed the remarks of Amy Elliot and sued the Zedillo government to address the complaint regarding alleged irregularities in the privatization of Teléfonos de México. “They should investigate Salinas’ shareholding, not only in Telmex, but in other privatized companies during his administration,” Fox said.
Moving past the affair, Slim retreated to the trenches without leaving politics. He wholeheartedly supported the campaign of Francisco Labastida Ochoa and he was present in the headquarters of the PRI in the afternoon of July 2, when it was made known that the PRI candidate was defeated. Slim was supportive of Labastida, despite the fact that he had contributed resources to almost all parties in contention, including the National Action Party.
The entrepreneur Guillermo H. Cantú, close to President Fox, author of Assault on the Palace: the Entrails of a War, revealed that the three businessmen that supported the NAP candidate most, after having done so with Labastida, were Slim, Roberto Hernández and Alfonso Romo.
Álvaro Cepeda Neri, a seasoned Sonoran journalist, emphasized Slim’s support of the presidential campaign of Labastida Ochoa in his column “Conjectures.”
Under the title “Slim in the PRI and Cathedral: Two bankrupt companies?” Cepeda Neri wrote:
The raw post-election has prevented us from getting to the bottom of what really happened … (the 1997 elections, the closure of the key federal funds for the branch thirty-three that kept millions of pesos flowing to states to “lubricate” the PRI machinery, etc.) and to examine other events. For example, that half of Carlos and Charlie, Slim Helú, was up to his elbows in Labastida’s campaign, proving that even an employer lucky with money (our Latin American and worldwide pride, as one of the richest men) can make mistakes.
What characterizes Slim is that since he began to enrich the streets of Correo Mayor until now, as he rubs shoulders with Bill Gates and other billionaires, is to have a nose for sniffing out when a company is on the verge of bankruptcy. He arrives as the “savior” to buy all kinds of companies available to the highest bidder… This is how Slim has become the owner of service chains (all Sanborns are his), bakeries, factories, banks, television, newspapers, computers, and so on. Businessman and entrepreneur, Slim is currently the richest man in the country of the post-revolutionary era, and especially since the rise of liberalism.
The only thing that comes to mind is that Carlos Slim, interested in bankrupt companies, is at best already getting closer to the PRI, which is near bankruptcy (it seemed like a bank for the millions that ran the election, until Zedillo cut off the supply), and he had gone to place an offer to buy the old party. Others say that Slim got closer to the PRI to ensure that in fact what the media said (Slim is a partner of Televisa and some radio stations), was true and that Fox had defeated Labastida and Cárdenas. So they already knew the PRI, in the sense that if you sell the PRI you will have a buyer.
Slim was reintroduced into the spotlight when the Vicente Fox administration had just begun. In an erroneous and illegal manner, Fox made the decision to appoint four of the most powerful businessmen as members of the Board of Directors of Petróleos Mexicanos.
In political circles, this was interpreted as payment for favors done for Fox during his campaign. As critics of the NAP president, they warned of the risks that businessmen could misuse information about PEMEX to gain strategic benefits.
Violating the Organic Law of PEMEX and public-sector entities, Fox appointed Slim, Alfonso Romo, Lorenzo Zambrano and Rogelio Rebolledo to be advisors of Pétroleos Mexicanos.
His decision provoked the disapproval of the Standing Committee that reprimanded the President of the Republic, citing that he had exceeded his powers.
Raúl Muñoz Leos, director of PEMEX and the transnational executive of DuPont, was the one who made the proposal that entrepreneurs join the board of directors.
The technocratic ex-president had tried to introduce changes to PEMEX, but was not as influential as Vicente Fox.
Due to Fox’s outbursts, representatives of parliamentary factions in the Standing Committee signed an agreement that stated:
The letter of appointment written by the President on behalf of four Mexican businessmen to serve on the Board of Directors of PEMEX are, obviously, contrary to the letter and spirit of Articles 25, 27 and 28 of the General Constitution of the Republic and violation of Article 7 of the Organic Law of Petróleos Mexicanos and Subsidiary Entities … Therefore, I believe it is necessary to undertake a review of such appointments by the president himself, in order to make new appointments in strict accordance with the established conventions in the Constitution and the Organic Law of the public sector in question.
Upon assuming his position as PEMEX “advisor,” Slim said it was possible to convert it into the best publicly owned oil company in the world, with the application of operational efficiency.
Later, through a decree published in the Official Journal of the Federation, a withdrawal was formally made of the appointments that had been made by the Board of Directors of Petróleos Mexicanos. The Organic Law of PEMEX established integration of the council of eleven members, six appointed by the president and five representatives of the oil union.
Finally, the business went from advisors to consultants and the Board of Directors of PEMEX was restructured.
On the eve of reforms to the Board of Directors of PEMEX, Slim said he would not withdraw because the company Petróleos Mexicanos is the country’s development lever for its fiscal strength. “It is key that it remain in possession of the State, and must get stronger and stronger,” Slim said.
The prestigious journalist Alan Riding of the influential The New York Times and author of the classic Distant Neighbors wrote:
The reality of a country that runs in a two-speed gear was further aggravated by the gradual inclusion of Mexico into the global economy. Mexico’s misfortune was that during the crashes of 1982 and 1994, revenue was concentrated in the hands of a few. But when it came to economic recovery, together with the liberalization and privatization policies, concentration of income continued. This phenomenon was by no means exclusive to Mexico: the US and Britain, the first two countries to take this route, had shown a steady expansion of the gap between rich and poor since the early eighties. The arrival of the “New Economy,” built around new media and high technology and inflated by speculation in the stock market, accelerated this process.
Mexico was slow to enter this cycle, but they acknowledged that it was now the only business model available. Two decades ago, developing countries thought they should be given special treatment. Today, countries like Mexico have had no choice but to join the global economy and play by their rules.
Fox needs to be able to count on the support of big business tycoons, many of them familiar faces from the past that have adjusted to economic change, such as the dynasty of Garza Sada of Monterrey, Lorenzo Zambrano of Cementos de México, and Alfonso Romo Garza of Pulsar, but also new rich men whose names have been unknown for the last twenty years: Roberto Hernández, president of Banamex, and especially Slim Helú, billionaire and head of Teléfonos of México and a number of other companies, and the richest man in Latin America. What they and most other business leaders have in common is a long history of supporting the governments of the PRI, but they are all now in agreement that Fox is a good choice for Mexico.
Slim always has attracted the gaze of the press while attending any public event.
Despite his relationship with the government of Vicente Fox, Slim never stopped expressing his point of view. Since the beginning, he was against the proposed tax reform by the president. When he proposed to exempt VAT on food and medicine, Slim said, “as long as you are careful about the selection of what products are taxed.”
Slim was against a position that he called nacioglobalifóbicos (national-globalizophobic), in which those who thought that foreign is always better and that nationals do not have the ability to confront transnational corporations.
“I differ from those who think that Mexican entrepreneurs cannot manage their own businesses or the many authorities that think it’s better to favor foreign over domestic investment,” Slim said.
Slim has confronted the left-wing politicians as much as the right. Porfirio Muñoz Ledo, who was one of his main challengers, was seduced by the King Midas of business.
When Muñoz Ledo became a PRD senator, he bluffed that he had in his possession a record that showed the punishable irregularities in the divestiture of Teléfonos de México, and the immeasurable stock market speculation that ultimately ended with Slim becoming the owner of public goods.
With the sale of Telmex, he went from an economic monopoly to a private company. As with the popular saying that money has no homeland, the argument that Telmex was in Mexican hands is very relative. It was a triumph of privatization over Republicans.
Overnight, Muñoz Ledo took a turn in his attacks on Slim. On July 7, 2000, five days after Vicente Fox’s presidential victory, the ex-legislator and ex-PRD president attended the wedding of Slim’s daughter Soumaya Slim Somit.
Muñoz Ledo was with a group of PRD supporters devoted to praising Slim, among whom were Payán Velver, Samuel del Villar, and other supporters of the left such as Epigmenio Ibarra, and other beneficiaries of the country’s richest man. They also coincided at the parties of such intellectuals as Monsiváis, Enrique Krauze, Iván Restrepo, Héctor Aguilar Camín, Ángeles Mastretta, Rolando Cordera, David Ibarra and Guillermo Tovar y de Teresa.
Years ago in the tribunal of the Congress Standing Committee of the Union, the engineer Heberto Castillo, a PRD senator, bitterly challenged Slim. The legendary fighter of the student movement of 1968 had demanded the investigation of the large fortunes forged during the administration of Salinas de Gortari.
Six weeks into the Zedillo government, Heberto Castillo questioned Slim’s wealth in the case of Telmex. Weeks later, Castillo published an article in Proceso magazine in December 1995 and sustained that President Zedillo’s government had no political will to prosecute the ex-president Salinas, as was noted in his appearance before the Chamber of Deputies. Attorney General Antonio Lozano Gracia argued that there was no basis to proceed against Salinas and his top aides, as well as businesses that benefited from the privatization program.
In an article dated January 1998, Ben Heff, a reporter for Universal News Service and RM in Washington, announced the existence of encrypted files in the Federal Bureau of Investigation (FBI) tracking the movement of hundreds of millions of dollars deposited by order of Salinas de Gortari in banks in the Caribbean.
While Salinas was suspected of having benefited and of having made a group of his business friends rich, he was not required to clarify the allegations of corruption against him.
Back in the splendor of the campaign of Luis Donaldo Colosio, the PRI called the barons of money to a fundraising dinner for the party. The event brought together the country’s richest families and was held in the lounge of Las Constelaciones del Hotel Nikko (the Constellation of Hotel Nikko). A special guest of the candidate, Slim grabbed the spotlight of the press.
The reporters swarmed around Slim’s table, where he was sitting among family and friends.
“Engineer, tell us about Teléfonos de Mexico. Cuauhtémoc Cárdenas has warned that if he wins the presidential elections, he will submit the company to a new contract. Cárdenas said that privatization was marred by irregularities. What is your opinion?”
To which Slim responded, “The bidding process was very clear.”