World on Fire - Brownstein, Michael [32]
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In retrospect, I still believe that privatizing Telmex, and bringing in Southwestern Bell to modernize the company, was on balance a good thing for the Mexican people. Since Telmex was privatized in 1990, more than $13 billion has been invested to upgrade and extend phone service, including in remote rural areas. A fiber optics network stretching more than twenty thousand miles has been built, and callers no longer have to wait two minutes for a dial tone. At the same time, many believe that the principal domestic beneficiaries of Mexico’s privatization process were former President Carlos Salinas de Gortari, his family, his cronies, and multibillionaire Carlos Slim.
Slim, who has been outplaying his blue-blooded counterparts at the game of globalization, merits a brief digression. Before the Telmex privatization, Slim was unknown in the United States. I knew only that he was around fifty and the son of a Christian Lebanese immigrant, that his name was incongruous in light of his rather substantial figure, and that his investment bank Grupo Carso, along with foreign partners Southwestern Bell and France Telecom, were planning to bid as a consortium for a controlling stake in Telmex.
Slim’s successful acquisition of Telmex catapulted him to international prominence, at least in financial circles. With Slim at the company’s helm, Telmex stock—once worth only pennies a share—soared after the privatization, and unlike many non-U.S. stocks, kept on soaring. Telmex’s market capitalization today hovers around $37 billion, making the company, as the Financial Times put it, “la blue chip numero uno” in Latin America. After Salinas’s presidency ended in 1994, there was a flurry of reports exposing pandemic corruption within Mexico’s ruling PRI. Because of his close identification with Salinas, Slim was often mentioned in the U.S. press, but always vaguely, hintingly, never with any concrete allegations. Rumors, meanwhile, were flying.
I’ll never forget an episode in 1996 when I was discussing the Telmex privatization in my International Business Transactions class (I had left Wall Street to go into teaching a few years earlier). In the middle of my lecture a slightly older student—she had worked as an analyst at Bear Stearns before applying to law school—raised her hand. “It’s pretty well accepted by now,” she announced knowingly to her other hundred classmates, “that in the Telmex privatization Carlos Slim was just a frontman for Salinas.” A buzz went through the room, but at that point another hand shot up, this time that of a young lawyer from Mexico who was getting a second master’s degree in law from the United States. “No, no, that is not true—you have it completely wrong,” he said indignantly. “Carlos Slim was not a frontman for Salinas. It was Salinas who was the frontman for Carlos Slim.”
In any case, whereas Salinas is now in disgrace and exile, Carlos Slim has never been wealthier. Forbes magazine recently listed him as Latin America’s richest man—every two minutes Slim reportedly makes $5,000, more than the average Mexican earns in a year—and he is popularly compared to the legendary American investor Warren Buffett. In the last few years, Carlos Slim has become an increasingly prominent figure in the United States as he continues to buy up large blocks of CompUSA, Barnes & Noble, OfficeMax, Office Depot, Circuit City, Borders, and other major U.S. retailers.
The bulk of Slim’s holdings, of course, are still in Mexico, where he controls most of Mexico’s local phone service, long distance, and Internet access, not to mention half of the nation’s stock market. Slim also owns Sanborns (Mexico’s most popular restaurant chain), a major ATM network, a mining company, numerous factories engaged in tire, metal, and other forms of industrial production, massive resort developments