Despite a fortune that is US$5 billion smaller than it was a year ago, Carlos Slim Helú has retained the title of world’s richest person for a third year in a row, also becoming well known as a man who can make money in a recession. Gemma Carter explores Slim’s vast business empire, which extends from telecommunications, finance and real estate to mining, retailing and heavy industry, and delves deeper into his personality, beliefs and apparently modest lifestyle.
As of March 2012, Mexico’s most prominent businessman Carlos Slim Helú is worth an estimated US$69 billion – equal to roughly 5.5 percent of annual economic output in his home country, where about half of the population lives below the poverty line. By comparison, John Rockefeller at the peak of his powers as a 19th century industrialist was worth just 2.5 percent of American GDP. According to his critics, Slim is only the richest man in the world because Bill Gates and Warren Buffett, numbers two and three on Forbes’ latest list of billionaires, have given so much of their wealth away, but the Mexican does not see it that way.
Slim is certainly well known for his scepticism about whether all of the money spent globally on philanthropy is worthwhile – in September 2010, Slim told an audience of hundreds at the Forbes Global CEO Conference in Sydney that the “trillions of dollars” given to charity and devoted to fighting poverty in the last 50 years have not solved any of the world’s problems. Instead, he believes that capitalists can serve society in a different, more effective way by tackling poverty directly via the creation of jobs and opportunities. “Our concept is more to accomplish and solve things, rather than giving – that is, not going around like Santa Claus,” he said to Forbes magazine in 2007.
While he may not be on quite the same scale as Bill Gates when it comes to being a deep-pocketed do-gooder, Slim’s accomplishments in the business world are undeniable. Born in Mexico City on 28th January 1940, the son of wealthy Lebanese immigrants, Slim received his first lessons in business in early childhood, when his father gave him and each of his siblings a savings book with their weekly allowance in order for them to manage their income and expenses. He soon put what he had learned into practice, opening his first bank account and buying shares in Banco Nacional de México at the tender age of 12.
After some time spent working for his family’s company, earning 200 pesos a week, Slim went on to study civil engineering at the Universidad Nacional Autónoma de México (UNAM), where he was both a student and a professor, also teaching algebra and linear programming. In 1965 he incorporated the holding company Inversora Bursátil and bought the bottling company Jarritos del Sur, then, a year later he created another holding company called Inmobiliara Carso – ‘Car’ from Carlos and ‘So’ from Soumaya, his new wife – and absorbed Inversora Bursátil. By this time, at the age of 26, Slim was already worth US$40 million and had established the basis for what would eventually become his multibillion-dollar empire, Grupo Carso. Slim spent the rest of the 1960s and the 1970s diversifying his holdings, reinvesting profits and founding new companies, including Promotara del Hogar, a residential real estate company, and GM Maquinaria, a buyer and seller of construction equipment, in 1967, followed by three other companies in 1969. In 1976 he acquired 60 percent of Galas de México, a printer of labels and calendars, and significantly improved its operations, and in 1980 he established Grupo Carso’s predecessor – Grupo Galas, a conglomerate with interests in construction, mining, retail, food and tobacco.
Mexico’s Mr Monopoly
By 1980, Slim was already a highly successful, eminent businessman, noted in his home country for his uncanny ability to spot undervalued companies and turn them into profitable machines, but it was during the Latin American debt crisis of the early 1980s that he really made a name for himself as a man who could make money in a recession. In 1982 Mexico defaulted on its massive loans and nationalised its banking system, and in the following year GDP declined by 4.2 percent. With the country’s finances paralysed, Slim proceeded to invest heavily and aggressively, making diverse acquisitions and buying large percentages of numerous businesses, the most important of which was Cigatam. The tobacco company, which he acquired early in the downturn, generated a cash flow that provided Grupo Carso with sufficient liquidity to capitalise on the abundant opportunities of the time.
In 1985 Slim acquired a majority stake in Sanborns, a large restaurant, retail, pharmacy and department store chain in Mexico and El Salvador, and its affiliate Denny’s, and in 1986 he added the mining company Minera Frisco and Empresas Nacobre, as well as their affiliates. Control of the tyre company Euzkadi, the market leader at the time, was also acquired; as was a majority stake in General Tire some years later.
The entrepreneur achieved his biggest success by far in 1990, the year of his 50th birthday, when Grupo Carso acted in concert with France Télécom and Southwestern Bell (now AT&T) to buy the state-owned landline telephone company Telmex. This US$1.76 billion privatisation marked the beginning of a new era of entrepreneurial development in a globally strategic sector. After investing millions to modernise the antiquated company, Slim used his influence over the government to fight off attempts by competitors, such as MCI and AT&T, to get a healthy portion of the Mexican market. By 2006, nine out of 10 telephone lines in Mexico were operated by Telmex, and its sister company, Telcel, operated nearly 80 percent of the country’s cell phones.
The dawn of the 21st century saw Slim expand his business interests beyond Latin America into the US, and he also began to heighten his control over the telecommunications sector. In 2000 he established América Telecom, the holding company for América Movil, and acquired stakes in various cell phone companies outside Mexico, including ATL and Telecom Americas in Brazil; Telgua in Guatemala; Conecel in Ecuador; and Techtel in Argentina. These deals were followed by further investment in the sphere in other South American nations, as well as a strategic alliance with Microsoft that led to the launch of the Spanish portal T1msn (now known as ProdigyMSN). By 2010, América Movil had grown from a small provider into a group with 216.8 million subscribers in 18 countries, and proceeded to buy Telmex, its former parent company, in order to better compete against Spain’s Telefónica.
Living in ‘Slimlandia’
By the end of 2007 Slim was in control of over 200 companies – with minor stakes in countless more, including an eight percent holding in The New York Times Company, to which he lent US$250 million in 2009 amid a particularly turbulent period in the company’s history. The telecommunications tycoon’s shrewd strategy of investing in struggling companies during difficult times has certainly paid off over the years, and it has won him both applause and criticism – not only from fellow Mexicans but also from the international community.
Indeed, Carlos Slim Helú made his fortune the old-fashioned way: by building monopolies and increasing his footprint in well-chosen industry sectors, gaining an economic stranglehold on his native country in the process. His grip on the Mexican economy has become so tight, in fact, that external observers and even Mexicans themselves have taken to using a new word to describe the country – ‘Slimlandia’. A February 2011 article in UK newspaper The Telegraph explains why it is little wonder that Mexico has found itself with the name. “The average Mexican will wake up on sheets bought from a Slim-owned store; buy their morning bread from a Slim-owned bakery; and drive to work in a Slim-insured car. They will call friends on a Slim-owned mobile phone, lunch at a Slim-owned restaurant, and smoke Slim-owned cigarettes.”
This long-practised style of wealth accumulation is far from unusual in Mexico, where vast chunks of the economy are dominated by monopolies – thanks to the privatisation of state companies in the 1990s. Here, Slim is both king of the monopolists and, to his critics, a personification of everything that is wrong with the country, which has one of the highest rates of income inequality in the world. According to a 2011 study by the Organization for Economic Co-operation and Development (OECD), income equality in Mexico has increased by 5.1 percent since the mid 1980s, while the income of the rich has grown by 1.7 percent per year. Between 2005 and 2007, Slim was making about US$27 million a day, while a fifth of the country managed on less than US$2 a day.
A study in contradiction
Slim denies that he is a monopolist, instead claiming that he enjoys competition: “We need more competition,” he told The Wall Street Journal in an August 2007 interview. The billionaire’s actions would appear to speak louder than his words, however, and proffer evidence of his efforts to block competition at every turn. Having gained control of Telmex in 1990, for instance, Slim quickly acquired one of the two main suppliers of copper cables and prevented Telmex from buying any cable from the other major supplier, eventually leading its owners to sell the firm to him.
On a wider scale, Slim has even been accused of hindering Mexico’s development. In a February 2000 interview with Bloomberg Businessweek, he stated that, “The key is the Internet. The Internet is the heart of this new civilisation, and telecommunications are the nervous system.” However, an OECD study released in January 2012 reported that Mexicans paid the highest prices for high-speed internet among the 34 nations in the OECD, having been overcharged by US$13.4 billion a year from 2005 to 2009. The hard-charging Slim steadfastly refutes the study’s findings, instead suggesting that it is not that the lower broadband impacts GDP growth, it is that the lower rate of growth affects the broadband.
While waxing lyrical about the importance of new technologies, Slim himself comes across as an ageing technophobe in rapidly changing times, admitting to preferring pen and paper over a computer. The world’s richest man also spends his money wisely, driving himself around Mexico City, living in a relatively modest six-bedroom house, and abstaining from the typical playboy billionaire luxuries of mega yachts or mansions around the world. In fact, Slim’s only expensive hobby is the collection of fine art – last year, he inaugurated a US$70 million museum in Mexico City to house his vast collection. Named after his late wife, the Museo Soumaya is free to enter, and aims to provide Mexicans who cannot afford to travel with an experience that would otherwise be impossible, according to Slim.
The museum is one of only a few examples of Slim’s efforts to silence those critics who have denounced him for his lack of philanthropy – and for his unwillingness to sign on to the Giving Pledge, a movement by Bill Gates and Warren Buffett that encourages the very wealthy to donate half of their riches to charity. While there are still many who maintain that he has become the richest man in the world at the expense of some of the poorest people in the hemisphere, Slim has bowed to international pressure and upped his charitable donations in the last few years. The Carlos Slim Foundation focuses on education and healthcare issues, and is currently involved in multimillion-dollar projects in Peru, Colombia and Mexico.
Nevertheless, during a speech at George Washington University in May this year, Slim reiterated his view that philanthropy is not merely a question of giving money away – rather, the economic implications must be considered. “Fighting against poverty and ignorance is imperative not only from ethical, social and moral reasons but also because of economic needs,” he stated. “Chronic pessimism leads to mediocrity.”
The ageing entrepreneur has also turned his attention to global economic issues, voicing his concern that government efforts to reduce budget deficits are short-changing education, and publicising the fact that he disagrees with most of the measures being taken. “I am very concerned about the world in general,” he said in an interview with Forbes Asia in March this year. “I think the solutions that [political leaders] are looking at are not the right solutions.” While Slim has so far remained focused on his many businesses and investments, he certainly has his own ideas about how best to solve the challenges facing Europe, the US and Mexico, and given his recent retirement from the boards of three of his largest companies, the billionaire certainly has more time to contemplate such issues.