within gringo pragmatism.
Anyone can become a millionaire overnight out of sheer luck. But to reach the top of the list of the world’s billionaires takes half a lifetime of effort and, according to modern Western mythology, requires the profile of a generous, creative and audacious man. Bill Gates is seen as an IT genius, Warren Buffett as an infallible investor, George Soros as a rebellious and chic millionaire. Carlos Slim is known for being one of the richest men in the world in a country with 50 million poor. Perhaps this is why, rather than believing in the value of his work, his critics compare him to the Russian oligarchs, who multiply their fortunes through corruption and receive business advantages under the shadow of power. The Wall Street Journal attributes Slim’s fortune to his monopolistic practices. The magnate has denied this time and again, although in Mexico there is a very popular notion that without the help he received from the government he would never have reached the heights of the world’s richest.
During the May 1 Workers’ Day Parade, 1989—when the PRI regime still went to great lengths to create the display of thousands of workers parading down cities’ main streets—then-president Carlos Salinas de Gortari, watching the event from the Palacio Nacional balcony, asked the director of the state-owned company Teléfonos de México (Telmex) to stop marching and come up to the balcony to watch the workers’ contingents together. A simple gesture like this, for the PRI, held the key to the future: the government was preparing to privatize the company. A year and a half later, on December 11, 1990, Slim was presented as the winner.
If social media such as Twitter and Facebook had existed back then, Carlos and Charlie’s would have become a trending topic—the popular joke alluded to the never-proven fact that Carlos Slim was in reality a front man for Carlos Salinas de Gortari in the purchase of the national telephone company. The first exhaustive journalistic criticism of the irregularities was Operación Telmex (Operation Telmex), by Rafael Rodríguez Castañeda, current director of Proceso, a weekly political analysis magazine. In his book, the journalist predicts the creation of a telephone monopoly with limitless gains. He also quotes a Business Week article, published in July 1991, that states:
rumors and allegations of nepotism surround the entire privatization process. In response, the government did the impossible to create an image of impartiality. For example, in the cabinet meeting that would decide the new owners of Telmex, the three bidders were named A, B, and C. But everyone knew who was who. “We’re not selling oranges here,” said a secretary of state.
According to this theory, there were political motivations behind the conditions for advantageous monopoly: the government needed to demonstrate that selling state-owned companies was profitable, and sought to consolidate and maximize Telmex in order to show it off as a success story, instead of creating free-market competition. According to this theory, Slim’s success as a businessman was supposed to signify the success of the PRI regime’s privatization policy.
A 1990 document entitled “Regulatory aspects of the privatization of Telmex” outlines the evolution of the regulations around the sector throughout the twentieth century in Mexico:
1938 General Communication Law
• Telephony franchisees were foreign
• Existence of two telephone companies, two public networks
1948–68 Stability and development
• Telmex is created by merging the two existing companies
• Annual growth rates of 10 to 14 percent
1968–81 Political crisis—Major intervention from the State
• Establishment of a new franchise (1976)
• Nationalization of telecommunications (establishment of the regulator-operator duality)
• Deterioration of tariffs, political and labor relations
• Growing tax burden
1982 Start of restructuring of the economy
• Start of process of change to establish a modern regime
• Correction of public finances
• Opening of the economy
• Democratic reform
1988 Change and opening
• Breaking of the duality regulator–operator
• Deregulation
• Privatization processes
Independent specialists in telecommunications say that a significant amount of the privatizations that took place during the 1990s in Latin American and in the former Soviet republics occurred in a very similar fashion. When companies ceased to be a state monopoly, two or at most three new major shareholders would enter, fusing an experienced operator with a huge financial backer in order to administer the existing telephone networks, because creating new infrastructure was not economically viable. An even more radical, often cited theory regarding monopolies in telecommunications is that they were “natural” because of the large-scale investment required in order to maintain a certain efficiency. However, it’s worth noting that with the networks already in place, as is the case now, it is possible to maintain efficiency and generate greater competition.
During Salinas de Gortari’s term of office, nearly 1,000 public companies were privatized—Telmex, the only telephone company in the market, was the most profitable, and the most controversial. Until then, Slim was known only as another businessman supporting Salinas de Gortari from the start of his election campaign. He was under fifty years old and the only thing widely known of his biography was that he had started out working as broker in the stock exchange and had made his fortune by buying companies in crisis and turning them around almost miraculously, inspired by the so-called Modigliani-Miller theorem, which encourages buying and operating companies even if they are financed by the sale of debt.
The purchase of Telmex included favorable clauses that gave the businessman control over the company, and the monopoly of its service, during the period that saw the greatest number of new landline purchases in the country. Buying Telmex in 1991 catapulted Slim as a public figure in Mexico, and perhaps contributed towards the normalization of evil that Nobel Prize-winning author Octavio Paz attributes to the PRI in his essay El ogro filantrópico (The Philanthropic Ogre).
The transition from a nationalistic to a free-market economy in Mexico can be compared to what Russia experienced during Perestroika. In the midst of these changes, both countries saw for the first time the emergence of multimillionaires who took center stage in the political and social life of the nation. Many of these wealthy men protagonized a type of capitalism where influence peddling occupied the void left behind by a lack of strong laws and government. For this reason, when under international scrutiny, the Mexican multimillionaires of the twenty-first century are seen as more akin to the Russian oligarchs than to Buffet, Soros or Gates, even though the conduct of the latter three has also been questioned, like when Soros launched a speculative attack against the pound sterling in 1992, known as Black Wednesday, causing severe damage to the British government. It is no secret that Gates has also consolidated a monopoly with Microsoft: nine out of ten computers in the world are manufactured by his company. The difference is, he went on trial in the United States for his monopolistic practices and, over time, became the greatest philanthropist that has ever existed, giving away more money annually than the entire budget of, for example, the World Health Organization.
Analyst Gerardo Esquivel created a report for Oxfam and the organization Iguales, entitled Desigualdad extrema en México: concentración del poder económico y político (Extreme inequality in Mexico: concentration