The Midas of Mexico

Amidst the Widening Gap between Rich and Poor, Ten Mexican Families Own 48% of Total Latin American Wealth

News | Nayeli Urquiza | April 2007

Forbes List #3: Carlos Slim controls telecommunications in Mexico (Photo: Creative Commons)

Economic inequality seems only to be deepening in Latin America, as multimillionaires continue to cash in on the high prices propped up by monopolistic control over goods and services.

At least, this is the case in Mexico, where telecom tycoon Carlos Slim made his way to third place on Forbes Magazine’s yearly list of multibillionaires released at the beginning of March.

This success story of "the-little-Lebanese-Mexican-who-could" began in the late 80s, when he bought the state-controlled telephone company during a wave of privatization. Slim’s modest fortune of about $6,000 million sky-rocketed over the last decade through leveraging and diversification. Today, he is worth $49,000 million and is the owner of Grupo Carso, a conglomerate of the most diverse ventures, from restaurant chains, music stores, mining extraction and distribution, the tobacco industry, as well as shareholder of Apple Inc.and Televisa, a media conglomerate present in most of Latin America.

Such wealth raises serious questions in a country were 40 percent of the population lives in poverty, and where telephone rates, both domestic and international, rank amongst the highest of all Organization for Economic Cooperation and Development member countries, according to a 2006 report by the Paris-based organization.

The growing divide between rich and poor is not only a Mexican phenomenon, of course, and the gap seems to be growing throughout Latin America. According to the Forbes study, there are 37 multibillionaires in the region whose wealth is increasing at a fantastic rate, some doubling their fortunes in just one year.

But it is in Mexico where it is most evident, as just ten people are in control of $74  billion, representing 48 percent of Latin America’s total wealth. According to the 2006 report by the World Bank "The Inequality Trap and its Links to Low Growth in Mexico," researchers estimate that the annual income of these multibillionaires is 14,000 times higher than that of the average Mexican.

In the meantime, the middle class is struggling simply to meet the high monthly electricity, telephone, gas and tuition bills. In their homes, Mexican families complain about the high costs of telephone services, sudden disruptions, and Slim’s new mission to make Skype internet telephony illegal.

According to the World Bank report, possibility of change seems unlikely now, as Slim seems to be a protégé of a corrupt judicial system and a group of elites highly influence its failings. This is the heritage of 71 years of governing by the PRI party (Partido Revolucionario Institucional), a regime where corruption, state-controlled monopolies and an oligarchic exchange of power ruled until the core of the system was so rotten that the people cried out for change, culminating in the 2000 presidential elections.

"The great challenge of the State reform is to inaugurate a new political future after 71 years," said Vicente Fox, the first opposition president since the 1920s revolution. "This forces us to be audacious in order to break paradigms, inertias and atavisms of a political culture which has seen in agreements an act of capitulation; and in political coincidence, full proof of cooptation." But after six years of Fox’s self-proclaimed and highly publicized term "government of change," people are still waiting for changes as their purchasing power seems limited by the monthly family budget and the economy rose only 1.6 per cent last year.

The report just confirmed these kinds of complaints made by the opposition and the media during the 2006 elections. It concluded that "democratization did not lead to any fundamental change, and in some respects the resulting political equilibrium is worse with respect to the exercise of unequal influence and efficiency." Fox’s democratically elected government did not change the way business is done in Mexico was because economic power was transferred from a single party-rule to a handful of the richest families in the country.

The report concludes that the main problem is that these Mexican Vanderbilts and Fords, have such an influence over the weak judicial system that antimonopoly lawsuits are toothless. One emerging telephone company, Avantel, has filed nine lawsuits against Slim’s Telmex (which controls every element in the telephone communications infrastructure, from cable networking, installation, cell phones and internet servers) but has lost every one of them.

The anti-trust authorities seem to be doing their job by accepting the lawsuits and filing formal complaints against the mogul but the courts have final jurisdiction. For  angry consumers and competitors, it seems pointless to voice their discontent, under a judicial system that is one of the least trusted in the world, according to the Transparency International 2006 Report, where it ranked 28th out of 38.

Altogether, Slim’s monopoly is hurting Mexico’s economic growth, while he continues to earn about $52 million dollars a day. Even his attempts at philanthropy are suspect: In comparison to Warren Buffet’s and Bill Gates’ charitable contributions of $37 and $31 Billion per year respectively, Slim donates a meager $ 6 billion.

Not only is it small compared to the US millionaires’ (who are only about 7 billion richer than Slim) but his philanthropic efforts will depend on the success or failure of his infrastructure development program, called IDEAL, to acquire contracts, among other things, for oil extraction. This type of "philanthropy" is not simply conditional, but seems more like a cover up a of power grab into the oil business.

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