The last thing Carlos Slim could be called is extravagant. The 54-year-old son of Lebanese immigrants didn't get to be one of Mexico's handful of billionaires by throwing money around. But this was going to extremes. Rather than keep his chauffeur waiting on overtime one recent evening, Slim sent the man home early. Then, at 10:30, when he knocked off work, Slim hopped into the driver's seat of his 1989 Thunderbird. A Cuban cigar in one hand and a cellular phone in the other, Slim gave an interview as he maneuvered across town. "I can do a lot of thinking when I drive," Slim explains. "And thinking is the most important part of my job."
Some job. Hands-on, no-frills has been Slim's style ever since he started amassing his hydra-headed, $3.2 billion empire. Grupo Carso makes everything from fiber-optic cable to cigarettes, and it now controls the national telephone monopoly, Tel fonos de M xico, the country's hottest stock. Slim also heads a $1.26 billion financial group, the country's fourth-largest, that has just launched a new bank. All told, the companies Slim controls account for a stunning one-fourth of the market capitalization of the Mexican Bolsa de Valores.
Sitting atop this vast fortune, Slim is something of a metaphor for Mexico's emergence as a promising Latin tiger. In the 1980s, while Mexico languished in debt, the walls around the economy still high, Slim had his eye on the turn- around. While Mexico's wealthy elite were spiriting their money out of the country, he quietly assembled a collection of companies at bargain-basement prices. He then whipped them into efficient enterprises, applying spartan rules to bloated managements and sloppy production. He named the group "Car" for Carlos and "So" for his wife, Sumaya Domit Gemayal, niece of Amin Gemayal, a former President of Lebanon.
POWERFUL ALLIES. Now, after five years of President Carlos Salinas de Gortari's tough economic medicine and a new free-trade deal with the U.S., Slim is in fighting shape for the onslaught of foreign competition. The impending arrival of such heavies as MCI, Chase Manhattan Bank, and U.S. auto-parts makers doesn't seem to pose a mortal threat to Slim's stakes in such fast-growing sectors as telecommunications, finance, and manufacturing. His profits are set to soar, in sharp contrast with those of other Mexican business titans huddling behind crumbling economic barriers.
One reason for his confidence is powerful international allies. By his side in the coming telephone wars is Edward E. Whitacre Jr., CEO of San Antonio-based Southwestern Bell Corp., a partner with Grupo Carso and France Telecom in a 20.5% stake of Telmex. Whitacre recently brought Slim onto the Southwestern Bell board. And international financier George Soros periodically snaps up chunks of Grupo Carso stock, which has appreciated tenfold since the group went public in 1990. Soros was so impressed with Slim's mutual-fund performance--32% dollar returns annually for the last 12 years--that he invited the head of Slim's financial group to serve on his Quantum Fund board.
Although Slim took his first major step out of Mexico by bidding with a consortium in the privatization of Peru's national telephone system in late February, his strategy will stay focused on Mexico. Where necessary, he will use his alliances with Southwestern Bell, Soros, Continental Tire, and others to get the money and technology to grab a commanding share of Mexico's booming market. "It would be ridiculous," says Slim, taking a drag on his Cohiba cigar, "to make investments with 2% returns [elsewhere] when here in Mexico you can still earn 20%."
Aside from his business challenges, Slim also has to be careful managing his image inside Mexico, where the armed rebellion of dirt-poor Indian peasants in Chiapas has spotlighted the nation's wide economic gulf. Mexico also faces a tense presidential election in August, in which the country's economic model itself--and its billionaire beneficiaries--are being questioned. Slim, a close friend of outgoing President Salinas, is confident that Mexico will stay its free-market course and avoid any political explosions. "Salinas' policies were necessary to pay the past-due bills left him by earlier populist policies," says Slim. One way to deal with the resulting social demands is to "redistribute wealth through the jobs I create by investing."
RESTIVE WORKERS. Never mind that while he's modernizing vast segments of Mexican business, Slim is also slashing payrolls, throwing more workers into the country's already huge pools of unemployed labor. Or that employees complain of Slim's fixation on the bottom line and his trampling of long-established worker-management traditions. "Grupo Carso's policy is to watch its money extremely carefully," says Benedicto Mart nez, secretary general of the National Union of Metal-Mechanical Workers. Slim argues that with global competition knocking on Mexico's door, there's no time for niceties. "Companies that haven't modernized or that have high operating costs will be out of the running," he warns.
But he's not insensitive to the deep-seated Mexican suspicion of individual wealth. Although he's personally worth an estimated $2.6 billion, he shuns publicity and lives a quiet, family-centered life in an unimposing house in Mexico City. While Slim rarely grants interviews, he recently spoke to BUSINESS WEEK, hoping to dispel some of the mystery surrounding his meteoric rise in Mexican business. "People say a lot of things about me," muses Slim. "But I consider myself a temporary administrator of society's riches. You can't take anything to the tomb with you."
Even though he's on top of Mexico's social pyramid, he knows he must run hard to stay there. One major challenge is revolutionizing the Stone Age telephone system. Telmex is midway through a five-year, $13 billion investment to improve basic phone service and install a fiber-optic network. It has reduced the waiting time for a new line from three years just six months, among other changes. But Mexicans, who have seen Telmex quadruple in market value since privatization, benefiting millions of shareholders around the world, want faster results. Even Slim confesses that "things are taking longer than we'd like."
RIVALS. There's no time to lose, as competition from the north looms. Bell Atlantic Corp. is joining forces with Telmex' main rival in cellular-telephone service. And in January, telecommunications giant MCI teamed up with Banacci, Mexico's No.1 financial group, to bid for a long-distance-telephone concession when Telmex' monopoly ends in 1996.
Slim, armed with a hefty war chest, claims he isn't fazed. But Grupo Carso depends heavily on Tel- mex' results: The telephone company contributed one-third of the group's net profits last year, or $160 million. Overall, Grupo Carso's profits were up an estimated 23% in 1993, to $480 million on sales of $3.2 billion--even though many of Mexico's companies bled red ink.
While the telecommunications makeover is a work in progress, Slim has already shown his turn- around skills in industry. Condumex, Carso's biggest subsidiary, serves the key sectors of auto parts, electricity, telecommunications, and construction, all targeted for double-digit growth through the 1990s. When Carso bought Condumex in 1992, a workout team slashed subsidiaries from 52 to 25. Staff was cut by 30%, down to 8,500 from 11,000. Administrative functions were centralized, and the luxurious headquarters was sold.
But the medicine isn't going down easily in Slim's old-line factories, where industrial unions are more vocal. At Euzkadi, Mexico's largest tire manufacturer, the work force has shrunk in half, to 1,315, since Carso bought it five years ago. "They made us sign a productivity agreement in 1992, but they never invested in new machinery, so one of the factories was closed," says rubber workers' union official Roberto Mendoza. Grupo Carso executives insist the 1920s-era factory was beyond repair and are now focusing on a modern plant in Guadalajara. Conceding that he needs to do a better job of explaining his goals to workers, Slim adds: "They shouldn't be worried about losing their jobs; they should worry about becoming efficient."
Slim's plans for the burgeoning financial sector follow the lean style. He recently launched a new nationwide bank, called Banco Inbursa, capitalized with a $500 million private offering, and intends to attract clients with cut-rate loans and services that are rare in Mexico's underbanked market, such as automatic checking overdrafts.
Slim's 110,000 employees can take a bit ef solace in the fact that he's nearly as spartan at Grupo Carso headquarters as on the factory floor. The corporate offices occupy an old two-story house with a mirrored-glass facade, with a jumble of nondescript Naugahyde furniture for just a dozen holding-company employees. Slim works here with his trusted troika of partners, Jaime Chico Pardo, Carso's University of Chicago-trained restructuring chief; Jaime's brother Fernando, who earned an MBA at Northwestern University before heading the financial group; and Antonio P rez Sim n, general director of Telmex. The partners own around 6% of Grupo Carso and a similar share of the financial group; Slim has about 65% of the two groups.
BOTTOM LINE. A former mathematics professor who studied engineering at Mexico's National Autonomous University, Slim is a numbers whiz. But he's no ascetic. He sports a few touches of wealth: Herm s ties, monogrammed dress shirts, and the Cuban Cohiba cigars. An avid student of Mexican history, his windowless office features a collection of rare history books and artwork by Mexican masters such as Diego Rivera. Other tycoons, such as media mogul Em lio Azcarr ga, the head of Televisa, flaunt their wealth with yachts and jets. Slim has no boat, no vacation home, no private plane. He and his wife and six children have lived in the same home for 24 years.
But no matter how modestly he tries to live, Slim's empire and influence keep multiplying. His emphasis on stripping labor and management costs is at the heart of Mexico's balancing act as it attempts to lift itself up from Third World status. Mexico must create cost-conscious, world-class enterprises yet at the same time solve huge social problems. These days, Chiapas is on everyone's mind as a symbol of Mexico's poverty-stricken majority. Mexico's political and business leaders must somehow couple efficiency with social well-being.
Slim is no die-hard supply-sider. To solve Mexico's deep problems, Slim says, trickle-down won't be enough. He would like to see a government jobs program and an orderly rise in wages. "One, for social justice. Two, for political reasons, so people will vote for you. And third, for economic reasons--the economy won't grow if the poor cannot afford to consume," he says. For Slim, it all comes back to that bottom line.