Vegas
07-04-2007, 02:21 PM
http://www.ibdeditorials.com/IBDArticles.aspx?id=268354752555056
Wealth: Mexico's Carlos Slim has surpassed Bill Gates as the world's richest man. As the kvetching starts about why Slim is so rich from a place so poor, the real issue is why his country doesn't have more like him.
We can already hear the grousing about how Slim could amass a $68 billion fortune in country where the average income is $6,700 a year and one of seven workers has fled to the U.S. to work illegally.
And Slim's net worth is impressive, no matter how it's viewed. For example, it amounts to 8% of Mexico's annual economic output, and half the value of its stock market. By comparison, Gates is worth a mere $59 billion.
Oh, there will be the usual whispering that Slim somehow acquired his fortune dishonestly. And it'll be easy to use his success to call for income redistribution and more "economic justice."
But the record shows a very different picture. Slim's fortune, built on a $400,000 inheritance and invested in Mexico's banks, telecom and retail sectors, is the product of investments in a stock market that has quintupled in value since 2002, according to Sentido Comun, the Mexican financial newsletter that first spotted Slim's gains.
Nearly all of it is public and transparent. As for Slim himself, he lives frugally, has never been investigated or accused of a crime, doesn't use wealth as a megaphone and has six good children who defy rich-kid stereotypes.
The real question isn't the success of Slim, who's an exceptionally talented investor, but why Mexico's system isn't creating more opportunities for wealth, given that country's resources, geography and demographics.
According to the 2007 annual Forbes list of the world's richest people, Mexico has 10 billionaires in a $700 billion economy with a population of 100 million.
The U.S., by contrast, has 404 billionaires, and an $11 trillion economy in a nation with a population of 300 million. That's one billionaire per 10 million citizens in Mexico, and 10.25 per 10 million inside the U.S.
This shows not that Slim is rich but that Mexico has a billionaire shortage. The country south of our border would likely have at least 100 billionaires like Slim if it had as favorable a wealth-creation environment as the U.S. In Latin America, only Chile, with two billionaires, approaches that same U.S. ratio.
Some blame Slim for the billionaire shortage, but the prevailing evidence points to Mexico's antiquated political system. It privatized some state assets for a maximum cash gain to the government in the 1980s and 1990s. That helped, but it also created a lot of monopolies and duopolies that shut out competition. In the end, only remaining state enterprises (like oil giant Pemex), powerful unions and business elites benefited. That's changing with the new administration of President Felipe Calderon, but it hasn't worked its way though the system yet.
Past policies killed Mexico's biggest potential engines of growth, which are its small businesses and entrepreneurs. Although Slim employs 218,000 Mexicans, Mexico needs to create 1 million new jobs a year to absorb all new workers coming into its work force.
So even Slim, the world's richest man, can't hire enough workers to cut into Mexico's masses of jobless. That's why Mexico's economy needs more competition, not less.
Slim's fortune was influenced early on by these past policies in the 1990s. He got a big boost when Mexico privatized its telecommunications in 1990.
"His beginnings as a tycoon were clearly a little bit tainted by the prevailing system in Mexico," explained Alvaro Vargas Llosa, whose book "Liberty For Latin America" examined how government favors large businesses. "He was able to strike an interesting and beneficial deal with authorities where he got a monopoly of sorts."
But Vargas Llosa says the blame lies not with Slim, but with the corrupt political structure he had to navigate.
"Many things that we can fault him with have to do with the prevailing system that is not competitive enough," he said. "One wishes Mexico had a lot more billionaires."
This can be seen by the fact that Slim has had success outside of Mexico's protected markets — particularly in Latin American countries like Peru.
That Slim has been able to adapt to changing investment climates and realities shows his fortune was built primarily on talent — not connections. While Slim has been able to change, it's Mexico's ability to change that's needed.
When will Mexico start creating the favorable climate for more billionaires that it clearly needs?
Wealth: Mexico's Carlos Slim has surpassed Bill Gates as the world's richest man. As the kvetching starts about why Slim is so rich from a place so poor, the real issue is why his country doesn't have more like him.
We can already hear the grousing about how Slim could amass a $68 billion fortune in country where the average income is $6,700 a year and one of seven workers has fled to the U.S. to work illegally.
And Slim's net worth is impressive, no matter how it's viewed. For example, it amounts to 8% of Mexico's annual economic output, and half the value of its stock market. By comparison, Gates is worth a mere $59 billion.
Oh, there will be the usual whispering that Slim somehow acquired his fortune dishonestly. And it'll be easy to use his success to call for income redistribution and more "economic justice."
But the record shows a very different picture. Slim's fortune, built on a $400,000 inheritance and invested in Mexico's banks, telecom and retail sectors, is the product of investments in a stock market that has quintupled in value since 2002, according to Sentido Comun, the Mexican financial newsletter that first spotted Slim's gains.
Nearly all of it is public and transparent. As for Slim himself, he lives frugally, has never been investigated or accused of a crime, doesn't use wealth as a megaphone and has six good children who defy rich-kid stereotypes.
The real question isn't the success of Slim, who's an exceptionally talented investor, but why Mexico's system isn't creating more opportunities for wealth, given that country's resources, geography and demographics.
According to the 2007 annual Forbes list of the world's richest people, Mexico has 10 billionaires in a $700 billion economy with a population of 100 million.
The U.S., by contrast, has 404 billionaires, and an $11 trillion economy in a nation with a population of 300 million. That's one billionaire per 10 million citizens in Mexico, and 10.25 per 10 million inside the U.S.
This shows not that Slim is rich but that Mexico has a billionaire shortage. The country south of our border would likely have at least 100 billionaires like Slim if it had as favorable a wealth-creation environment as the U.S. In Latin America, only Chile, with two billionaires, approaches that same U.S. ratio.
Some blame Slim for the billionaire shortage, but the prevailing evidence points to Mexico's antiquated political system. It privatized some state assets for a maximum cash gain to the government in the 1980s and 1990s. That helped, but it also created a lot of monopolies and duopolies that shut out competition. In the end, only remaining state enterprises (like oil giant Pemex), powerful unions and business elites benefited. That's changing with the new administration of President Felipe Calderon, but it hasn't worked its way though the system yet.
Past policies killed Mexico's biggest potential engines of growth, which are its small businesses and entrepreneurs. Although Slim employs 218,000 Mexicans, Mexico needs to create 1 million new jobs a year to absorb all new workers coming into its work force.
So even Slim, the world's richest man, can't hire enough workers to cut into Mexico's masses of jobless. That's why Mexico's economy needs more competition, not less.
Slim's fortune was influenced early on by these past policies in the 1990s. He got a big boost when Mexico privatized its telecommunications in 1990.
"His beginnings as a tycoon were clearly a little bit tainted by the prevailing system in Mexico," explained Alvaro Vargas Llosa, whose book "Liberty For Latin America" examined how government favors large businesses. "He was able to strike an interesting and beneficial deal with authorities where he got a monopoly of sorts."
But Vargas Llosa says the blame lies not with Slim, but with the corrupt political structure he had to navigate.
"Many things that we can fault him with have to do with the prevailing system that is not competitive enough," he said. "One wishes Mexico had a lot more billionaires."
This can be seen by the fact that Slim has had success outside of Mexico's protected markets — particularly in Latin American countries like Peru.
That Slim has been able to adapt to changing investment climates and realities shows his fortune was built primarily on talent — not connections. While Slim has been able to change, it's Mexico's ability to change that's needed.
When will Mexico start creating the favorable climate for more billionaires that it clearly needs?