To the magnates, go the spoils

A deep dive on oligarchs and inequality in Mexico

Welcome to part one of a deep dive edition of The Mexpatriate.

“When you live for the opinion of others, you are dead. I don’t want to spend my life thinking about how I’ll be remembered.”

-Carlos Slim

It’s tough being a multi-billionaire. Everyone is suspicious of your motives and your hand gestures; no one (least of all in the media) seems to give you a fair shake. And if you’re Carlos Slim, even Nobel-prize winning economists blame you for societal ills.

As of today, the net worth of the wealthiest person in Mexico (and Latin America) is equivalent to nearly 4% of his country’s GDP, at an estimated US $82 billion. Even Elon Musk can’t compete with that (his net worth after the 2024 U.S. election was estimated to be equivalent to roughly 1.6% of U.S. GDP).

Museo Soumaya (named for Slim’s late wife) houses the extensive art collection of Fundación Carlos Slim in Mexico City. (Photo: Grupo Carso)

Paying for internet service, buying a microwave, going to the movies, receiving a remittance, watching a TV news broadcast or buying insurance—these are just a few of the many ways that Mexicans interact every day with the conglomerates of Carlos Slim (Grupo Carso), Germán Larrea (Grupo México) and Ricardo Salinas Pliego (Grupo Salinas). Empowered by years of running monopolies and semi-monopolies, the tentacles of Mexico’s three wealthiest individuals can be found across much of the Mexican economy.

What can be learned about inequality in Mexico today from the rise of its top magnates?

The sins of neoliberalism

Mexico was labeled one of the world’s most unequal countries by the World Inequality Lab in 2021. In 2022, the richest 10% of Mexicans represented 36% of the country’s income, and the bottom 50% received 20% of national income. But more surprising than this statistic is what being in the top 10% of earners actually means in Mexico—the person at the top of this bracket earns over 9,000 times the person at the bottom of the same bracket. As explained by journalist Viri Ríos:

“In other words, Mexico is a country that is so unequal that being in the ‘top’ (the richest 10% in the country) means little. In fact, there are families in this class who still lack essential services. According to Coneval, among the ‘upper class,’ 22% do not have social security, 15% don’t have healthcare services and 5% have educational setbacks.”

While Andrés Manuel López Obrador and his party have made strides in combating poverty and inequality in Mexico via increased spending on social programs and raising the minimum wage, the country’s ultra rich have also fared very well—a fact that the leftist president even pointed out in defending his term’s achievements last year: “...there isn’t one big businessman who has failed; on the contrary, all of them have profited and there are businessmen who…have even doubled their fortunes.”

For all the fear mongering that has surrounded AMLO and his politics since 2000, his presidency didn’t harm the oligarchs’ fortunes, though it did alter the structure they were built on.

If you want to stay on top of the national conversation in Mexico, sign up for a paid subscription for full access to The Mexpatriate.

Stagnant wages and uneven growth, coupled with the corruption oozing from the administration of Enrique Peña Nieto, helped AMLO finally win the presidency he’d sought and lost twice before, with a pledge to reverse three decades of neoliberal policies by his predecessors—a counter-reformation that President Sheinbaum has continued.

However, neither morenista has taken the country back to where it was prior to the debt crisis of the 1980s and the privatizing term of President Carlos Salinas de Gortari (1988-1994), once dubbed “the father of modern inequality” in Mexico by AMLO. During the Salinas sexenio, 390 state-held companies were privatized and the country went from having one business family (Garza Sada) on the Forbes global multimillionaire list to 23 of them (including Slim, Larrea and Salinas Pliego).

While Morena’s constitutional reforms have restored the primacy of state energy companies and put limits on private concessions in the mining and water sectors, these industries still have significant private participation. For example, 76% of the country’s water concessions are owned by large corporations and 8.59% of national territory today is held by private mining companies via concessions.

Perhaps the most obvious example of prematurely declaring neoliberalism vanquished is NAFTA. The free trade agreement was heavily criticized by the Mexican left when it went into effect in 1994, but was updated as the USMCA in 2018, and has been defended by both AMLO and Sheinbaum. “The main difference is that there was a change of regime in Mexico as well,” said Sheinbaum in January when discussing NAFTA versus the USMCA. “And now it’s not integration at the cost of sovereignty.”

Austerity and “Slimismo”

Another hallmark (though hardly an original one) of the 4T philosophy is “republican austerity” which has led to downsizing the government in many areas and slashing budgets. In AMLO’s case, this was done in the name of crushing corruption in government—by turning off the spigot of funds, rather than successfully prosecuting the corrupt. As described by academic Inés Escobar González:

“Neoliberal or ‘republican,’ Mexican austerity is rendered a necessity by the country’s tax code, which overwhelmingly benefits the rich, the very rich and large corporations against state capacity and the general interest…Under López Obrador, Mexico has remained one of the most regressive fiscal states in the world and has continued to register the weakest fiscal capacity in the OECD.”

This has put the state in a fiscal vice: with a ballooning budget for social programs and infrastructure projects, and a government with limited funding for essential services including healthcare and education. And this is exactly where the magnates like the state to be: broke and willing to negotiate, and happy to postpone reforming the tax code.

In his traditional annual press conference in February, Slim had positive things to say about Sheinbaum’s Plan México, emphasizing the importance of investment and growth and education. But when asked about tax reforms, he said they are “not good” and implied that changes to the tax code would lead to a decline in investment. A classic example of what you could call “Slimismo”—capitalizing on a government in a tight fiscal corner, so it will maintain the status quo.

While federal tax revenue has increased 48% in nominal terms between 2018 and 2023 via better enforcement and efficiency, Mexico still has the lowest tax-to-GDP ratio in the OECD and falls behind the average in Latin America and the Caribbean. The country’s tax laws favor the top earners—according to Oxfam, in 2023, individuals with an annual income of 500 million pesos (approximately US $25 million) or more represented just 0.03% of total tax revenue. While the law stipulates a 30% tax on corporate income, the same report found the effective rate in 2021 was between 1% and 8%.

Since 2020, a constitutional reform banned the practice of tax forgiveness, a “fiscal amnesty” that had wiped out 270 billion pesos of tax debts owed to the government between 2007 and 2015, largely benefiting big companies. However, some tax debt cancellations have continued, and Slim’s businesses have been the beneficiaries.

How to win contracts and influence governments

The conglomerates of Slim, Larrea and Salinas Pliego have grown to be ubiquitous and indispensable, including for the government itself as it awards contracts for building infrastructure, or rolling out social programs.

Construction firms owned by Slim have been awarded contracts repeatedly in recent presidential terms, including for the Tren Maya, as well as for the Pemex Olmeca refinery, taking advantage of AMLO’s desire to rely on domestic over foreign contractors.

Banco Azteca, which is part of the Grupo Salinas conglomerate—no relation to former President Salinas by the way—was contracted in 2019 by the government to disperse funds for beneficiaries of social programs before its own Banco del Bienestar branches were ready. As explained by Banco Azteca’s director in 2023: “They realized (López Obrador’s administration) that no other bank could reach all these communities like we do, and so logically and because of political necessity…they set up the social programs with us, there wasn’t any other way.”

While all three magnates benefited from the privatization era in expanding their net worth and their presence across multiple industries, they are all quite different in their approach to public life and national politics. At times, they have been direct competitors and at times, they have joined forces.

In part two, I’ll profile each billionaire to better understand how they have weathered changes in government and continued to influence Mexico’s political economy.

Thank you for reading and feel free to send me your suggestions, comments and questions at hola@themexpatriate.com. Please consider upgrading to a paid subscription to get full access to every newsletter, and support my work.