Economic Co-operation and Development (OECD) study, which concludes that between 2005 and 2009, thanks to Slim’s telecom monopoly, Mexicans were $129 billion worse off (an amount equivalent to 1.8 percent of the country’s yearly GDP), a fact attributable to the lack of competition and high concentration of the market within an openly dysfunctional legal system. “Evidently, the weakness of Mexican institutions,” writes Esquivel, “has contributed to the sharp increase in the country’s widespread inequality. The entire Mexican population paid extortionate telephone rates due to the monopolistic power of Mr. Slim’s companies.”
When Slim submitted his tender for Telmex, he didn’t even make the Forbes list he now tops. The story is often told by his admirers that when he received the state-owned company he was a well-established businessman who possessed an admirable downto-earth quality in his style of working with people. His defenders also recognize that Slim had a close relationship with Salinas de Gortari since his times as secretary of programming and budget, and the tycoon has never tried to hide the fact that he is a PRI sympathizer.
My interviewees often described Slim as a businessman who was sharp, nationalist, austere and a loyal PRI supporter who, a year after purchasing Telmex, achieved a net worth of over $1 billion, with which he entered, for the first time, into the exclusive club of those on the Forbes list.
Since he appeared on the global scene, one of his main critics has been the Wall Street Journal, though they have their own agenda in their editorial questions, according to some specialized journalists, such as Diego Fonseca: “WSJ tends to speak for Corporate America, which has been wanting to get its hands on Telmex for a while.” The author of Joséph Stiglitz detiene el tiempo (Joséph Stiglitz stops time), a narrative profile of the economist, explains that now the bulk of the value of Slim’s telecommunications businesses is increasingly international, particularly when it comes to mobile telephony, Internet and data, with a more promising future than fixed landlines, and that telecom monopolies are almost “naturally occurring” in deregulated economies due to the scale of business (the high cost of investing in landlines in the past and, more recently, the arrival of mobile telephony).
Fonseca explains:
At least in the twenty greatest world markets there is one “incumbent” (a company with vast shares as compared to the rest, as it was the buyer of a privatized asset) during the opening. These incumbents have handled at least 60 percent of each market. Many of them are private and many others are partly state-owned. (An example: Telefónica, which has thrown bombs at Slim for his “monopoly,” has historically been dominant in Spain, and is a company of mixed public-private capital.) As the infrastructure becomes optimal and the markets increase their client numbers, the weight of the incumbents is reduced. That makes the Mexican phenomenon more complicated, because after almost twenty-five years, recently with the start of 2014, Slim would reduce his enormous share from 70 percent to 49 percent, a share which is nearer to what telephone companies possess in the main European markets, for example.
Since Slim reached the top of the ultrarich, he insists, when speaking at conferences in the United States, that he does not run a telecom monopoly because in Latin America, for example, he is competing against Telefónica de España, and has competed at different times against Vodafone, Verizon, AT&T and MCI World Com. In fact, he often goes even further to suggest that there are no monopolies anywhere in the world: “It’s just that there are some companies that are bigger than others,” he says.
Telmex represented “very difficult professional and financial challenges,” Slim explains in his document “History of Grupo Carso.” At the time of purchase, the telephone company was operating “with huge deficiencies in service, obsolete equipment, a deteriorated exterior plant, a huge demand that was not being met, and combined subsidies of painful adjustment. All this was having huge consequences on the social and economic life of the country.” Then he revealed that his investment was financed through unsecured debt for $500 billion: “The first public private offer for $307 billion, an increase in capital of $500 billion, and another public international offer for $1.094 trillion in January 1993.”
The businessman says that consolidating the Mexican controlling company “was a difficult task due to the investment amounts and terms (five to ten years), and negotiations with our technological partners. Southwestern Bell and France Telecom were particularly complex, although we have not had any problems since the agreements were finalized. No doubt, the more you discuss and define the conditions of a partnership, the less problems you encounter further down the line.”
For Jacques Rogozinski, who led the privatizations during the government of Salinas de Gortari, what happened with Telmex and other state-owned companies was a normal process considering the context:
In Mexico, the potential buyers who had access to the kind of resources required to purchase and operate Telmex and other state-owned companies and banks constituted a very small group of businessmen: the income distribution, the lack of savings, and the absence of loans for local businesspeople by the national and international banks, among other factors, did not allow (and still do not allow) for the development of a broader network of large businesses. On the other hand, whether there is a greater or smaller number of stakeholders does not depend on Mexico: all over the world, purchasing large companies is something that can only be done by a handful of large-scale corporate groups with extensive knowledge of the sector and a group of financial partners with sufficient capability to provide the capital in the long term. In Mexico, that market is still very small.
If anyone wanted to participate in the processes of purchase and sales of state-owned companies, they had to have a huge financial backing and belong to the country’s corporate elite. Therefore, they also needed to have political connections with those in power, including at the presidential level. This happens in all countries. It would be absurd that if Bill Gates or Mark Zuckerberg call the president of the United States, he refused to take their call. And it is equally naïve to suppose that, in private conversation, the president of a nation would not pay attention to the needs of the most important businessmen in his or her country.
The term “technocrat” was coined by H. G. Wells in one of his science fiction novels published in the early twentieth century. Now it could be defined as a science or technology expert with a great deal of power or influence over the government, regardless of political or ideological convictions. The term has been applied at various decisive moments in Mexico’s political life to Jacques Rogozinski, who completed his PhD in economics at the University of Colorado.
Rogozinski was working for the Mexican National Lottery in the 1980s when he received the invitation to become part of the central sector of the federal government of Mexico from Pedro Aspe, an MIT economist and one of the main members of Carlos Salinas de Gortari’s team. As president of the PRI party, between 1988 and 1994 Salinas de Gortari sold most of Mexico’s state-owned companies, including Telmex.
“Hey, why don’t you come and work with me? Cut the umbilical chord already,” said Aspe, who was then secretary of programming and budget in the cabinet of Miguel de la Madrid, the president in power prior to Salinas de Gortari. That is how Rogozinski and Aspe were tasked, in early 1988, with the mission of studying privatization around the world. Rogozinski recalls Aspe’s request: “All I want you to do is travel and research what different countries are doing with privatizations in general, and some in particular, such as telecommunications.”
During Salinas de Gortari’s presidential campaign, Rogozinski visited countries like Italy, Germany and Chile, although he focused mainly on the privatizing processes taking place in France and England. “As you know, Mrs. Thatcher was the figurehead of privatization and she was the one who got furthest with it,” says Rogozinski. “I also had the opportunity to visit France and see how they had done it, although they had not exactly privatized the company, instead they had modernized the entire telephony department of France Telecom.”
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