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 Business News | May 2007 
The Richest Man You've Never Heard Of
 Chris Hawley - USA TODAY
| Carlos Slim is the world's second-richest man and is closing in on No. 1 Bill Gates, "Forbes" magazine says. (Andrew Winning/Reuters)
Carlos Slim Helú has a controlling interest in at least 222 companies and smaller investments in many more. Some of his companies:
Teléfonos de México (Telmex) Mexico's main telephone company
Prodigy Infinitum Mexico's main Internet provider
América Mvil World's fifth-largest cellphone company; owns Tracfone in USA
Sears of Mexico 51 department stores
Philip Morris Mexico Seller of Marlboro and other brands of cigarettes
Sanborn's Chain of 168 restaurants and department stores
Dorian's 54 department stores
Music stores 71 stores under the Tower Records, Mixup, Discolandia and No Problem names
CompUSA Chain of computer stores in USA
Inbursa Financial Includes Inbursa bank, insurance companies and a brokerage firm
Source: USA TODAY research |
Mexico City — Carlos Slim Helú's business career began on the playground, trading baseball cards.
He would buy the adhesive-backed cards at a candy stand in downtown Mexico City, then make a meticulous record of each trade in a notebook, carefully evaluating whether he had come out on top.
By age 12, he had moved on to trading stocks and bonds. Before turning 30, he owned a soft drink company and a stock brokerage. Now, at 67, Slim is the world's second-richest man and is closing quickly on Bill Gates, according to Forbes magazine's most recent rankings. Slim's business empire stretches from Mexico to the USA — including major stakes in companies such as CompUSA and Saks Fifth Avenue — yet most Americans have never heard of him.
Slim accumulated his $53 billion fortune by collecting companies much as he once did baseball cards. He searches for undervalued businesses, infuses them with cash and uses the size of his holdings to overwhelm the competition. He now owns controlling stakes in at least 222 businesses, but he tells USA TODAY in a rare interview that he has never forgotten the lessons of his youth.
"Buying well is a discipline," he says. "The first type of business negotiation you do as a child. ... (Trading cards) was a way to understand supply and demand, to understand the market. ... Some boys had few (cards), and some had a lot."
These days, Slim has a lot. His wealth has caused some resentment in a country where 40% of the population lives in poverty and thousands emigrate each year to seek opportunity in the USA. Both the U.S. and Mexican governments complained recently that Mexico's economic growth is stunted because large conglomerates such as Slim's have too much control.
From the minute many Mexicans are born — perhaps in one of Slim's Star Médica hospitals — they put money in his pocket. They use electricity carried by Condumex brand cables, drive on roads paved by the CILSA construction company and burn fuels pumped from Swecomex drilling platforms. They communicate through Telmex phone lines, smoke Slim's tobacco, which is sold under the Marlboro brand, and shop at Sears Roebuck of Mexico, a subsidiary of his huge Carso Group.
Even the ground under their feet has been touched by Slim: His Porcelanite ceramics company makes 40% of Mexico's floor tiles.
"It's hard to live a day without buying one of his products," Sandra Morales, 31, says as she eats lunch in the Plaza Insurgentes shopping center — a property owned by Slim — in Mexico City. "He's so rich and powerful, and in a country where there are so many poor."
Slim says he is held to a double standard because he is Mexican, and that many U.S. companies such as Microsoft, Boeing and Intel enjoy similar dominance of their sectors.
During a two-hour interview in Spanish in his Mexico City office, Slim puffs a cigar and offers similarly strong opinions on everything from Mexico's future to Bill Gates' charity efforts.
He says Gates, the only man on the planet richer than Slim, could find a better way to spend his fortune.
"Gates has to study how he can (fight poverty) in the same way that Microsoft ... succeeded in business, because charity has not solved the problem," Slim says. "It's based on my conviction that poverty is not fought with donations, charity or even public spending, but that you fight it with health, education and jobs."
A love for numbers
A widower, Slim spends most of his time these days in a relatively modest, second-story office above a branch of his Inbursa bank. He keeps a doorbell-like buzzer on his desk to summon two assistants, who cater to his numerous and varied whims.
Slim's many obsessions still include baseball. His favorite team is the New York Yankees. Sitting at his desk, he pulls out a notebook with a treatise he is writing, purely for pleasure, on Barry Bonds' statistics. He also has designed an "improved" compilation of baseball statistics he would like to see added to USA TODAY's Sports section.
"I like numbers," he says. "Words speak to some people; to others of us, it's numbers."
Slim says he inherited his drive from his father. Julian Slim Haddad was a Maronite Christian whose family left Lebanon when he was 14. Julian Slim opened a general store in Mexico City, called the Star of the Orient, just as the violent Mexican Revolution was beginning to sweep the country in 1911.
It was the elder Slim who forced Carlos to keep ledgers of his allowances and expenses.
"Carlos: remember that all assignments given to you must be done on time, quickly, in much clearer letters and without erasures. If not, I'm going to deduct from your allowance," says a note in one of the ledgers, which Slim still keeps on his office bookshelf.
Slim also adopted his father's penchant for profiting during times of crisis.
During the 1980s, when Mexico's economy buckled under a debt crisis and other businessmen scrambled to get their money out of the country, Slim snapped up stock at fire-sale prices. He bought controlling stakes in the Sanborn's chain of restaurants and department stores, a tire company, hotels and more.
Soon after, in 1990, Slim controversially purchased what could be deemed the Mickey Mantle rookie card of Mexican companies.
The Mexican government was auctioning off several state-owned enterprises including Teléfonos de México, the state-run telephone company also known as Telmex.
Slim and his partners, France Telecom and Southwestern Bell, beat two other groups of bidders to win control of the company. The consortium paid $1.76 billion for a 20% controlling stake.
Since then, the market value of Telmex stock has rocketed from $7.39 billion to $41.2 billion. The company owns about 90% of Mexico's phone lines.
Members of the opposition Democratic Revolutionary Party alleged that Slim underpaid for Telmex and demanded that then-president Carlos Salinas de Gortari be impeached for negligently selling Telmex at less than market value. A congressional committee — controlled by Salinas' party — later found no evidence of wrongdoing, but suspicions linger in Mexico.
Slim says he won Telmex because his offer was better — about 8 cents more per share than the next bidder, according to the government.
"A lie repeated many times begins to be believed," Slim said. "We won because we paid more."
Integrating an empire
After acquiring Telmex, Slim's net worth increased dramatically. He integrated his companies so that they did as much business as possible with each other. At the Carso Group, the holding company for many of Slim's investments, No. 6 on the list of 10 corporate principles is: "Money that leaves the company evaporates."
The domination of Mexican conglomerates chokes off growth of smaller companies, says Celso Garrido, an economist at Mexico City's Autonomous Metropolitan University who studies Mexico's business dynasties. The resulting shortage of good jobs drives many Mexicans to seek better lives in the USA, says Roderic Ai Camp, author of Mexico's Mandarins, a book about the country's power elite.
Even Slim compares his business model with that of another company often accused of monopolistic practices: Wal-Mart.
"If Wal-Mart invests a billion dollars and others invest $100 million, Wal-Mart is going to grow more. So if we invest $2 billion a year over many years and others invest $500 (million) or $100 million, it's illogical for them to have the same size as us," Slim says.
Slim's holdings, in business and beyond, are now so vast that he sometimes loses track of what he owns. He has one of the world's biggest collections of Auguste Rodin sculptures, plus more than a dozen Pierre-Auguste Renoir paintings, but he rarely makes the purchases himself.
Yet, the small boy with the ledger notebook still surfaces from time to time.
While speaking in his office, Slim impulsively decides he needs to know the value of his necktie, which is lying on a chair nearby. He stabs a button on his intercom, summoning his assistant, Silvia Esparragoza.
"Silvia, how much do these ties cost there in Sanborn's?"
"Those ties cost, on average, 481 pesos," Esparragoza replies.
"About 43 dollars," Slim says, figuring the exchange rate in his head. "Is that with tax?"
"Yes, with tax," Esparragoza says.
"On sale or not on sale?"
There is silence from the intercom. "Um ... I don't remember," Esparragoza says.
Looking disappointed, Slim flips off the intercom.
"The tie is from Sanborn's, but the shoes I buy from Saks, which isn't my store," he says.
Then he corrects himself.
"Well, we're partners — but it's not my store," he says, smiling.
In fact, the Slim family is Saks' biggest shareholder, with 17.4% of the U.S. company's shares.
Riding Mexico's stock market
Slim's fortune has surged in recent months — by at least $23 billion since February 2006, Forbes says — primarily because of his holdings in Mexico's booming stock market.
The market is up 58% in the past year as large corporations have posted robust earnings, although unemployment and wages in Mexico have stayed more or less steady.
As Slim's wealth has grown, so has the criticism.
Business groups regularly complain about Telmex's business phone rates, which are more than twice as high as comparable rates in the USA. In April, U.S. Treasury Secretary Henry Paulson said Mexico would benefit from more competition. Mexican President Felipe Calderón pledged in April to make it easier for companies to enter the telephone market.
Slim came under fire again last June, when Bill Gates announced he would retire from Microsoft in 2008 to devote his time to his Bill & Melinda Gates Foundation. Days later, Warren Buffett — whom Slim recently passed in the Forbes wealth rankings — announced he would donate most of his $52.4 billion fortune to Gates' foundation.
Such generosity left many Mexicans looking at Slim expectantly.
"The fact that Bill Gates and Warren Buffett ... are channeling the majority of their fortunes to philanthropy exposes Slim's passivity," wrote Jorge Zepeda Patterson, a Mexican columnist. "Instead, we Mexicans continue donating 'philanthropically' to Telmex's finances, thanks to its extraordinary rates and profit margins."
In March, Slim pledged to inject $6 billion into his three charitable foundations over the next four years. He also plans a new building for his Soumaya Museum — named after his late wife — that is aimed at exposing disadvantaged Mexicans to European art.
Slim says his most important pursuit is a new, for-profit venture called the Latin American Development and Employment Generator, or IDEAL for its acronym in Spanish. The company will build infrastructure projects — dams, hospitals, universities and toll roads — and, in many cases, operate them at a profit. Slim says such projects would create more jobs than charity projects undertaken by Gates and Buffett.
Slim says he's optimistic overall about Mexico's future. He says Mexico's economy soon could begin growing at a rate of 5% a year — about twice the average rate so far this decade — enough to generate more jobs and discourage as many Mexicans from leaving the country for the USA.
What Mexico needs most, he says, is better education, especially in engineering, and more investment in machinery.
Meanwhile, Slim has begun passing day-to-day control of his companies to others, including his three adult sons. He rolls his eyes when asked how he would like to be remembered.
"I think they must teach that question in school, because they always ask me that," he says.
Slim's own companies employ 218,000 people. Ensuring that those companies are strong may be his most important contribution to Mexico, he says.
"When I die, I'm taking nothing with me," Slim says. He taps a balance sheet that shows the increasing value of his companies.
"Everything I'm leaving is right here."
Hawley is Latin America correspondent for USA TODAY and The Arizona Republic |
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