As a native of Mexico and a lifetime admirer of (and former editorial writer for) the New York Times, I confess that part of me wants to feel a measure of pride that the Sulzberger family has turned to a Mexican businessman for help. The New York Times Co. has announced that Carlos Slim Helu is essentially lending the beleaguered media company—aren't they all?—$250 million. The Mexican tycoon will receive six-year notes with warrants that can be converted to common shares.
Slim already owns a 6.9 percent stake in the company from a previous investment and could own roughly a fifth of all common shares if he converts the warrants. Not only will he give the Times some much-needed capital, but, because he is getting common stock, he will not dilute the Sulzberger family's control over the newspaper.
But my Mexican pride doesn't survive a moment's reflection. If the Sulzbergers think they can take Slim's money without tarnishing the newspaper's brand, then America's media elite must really think that Mexico doesn't matter.
Let's face it. The New York Times would never strike a deal with a U.S. tycoon of a similar profile, for fear of triggering real or apparent conflicts between the newspaper's coverage and the investor's interests. Not that you could ever find such a U.S. tycoon: The conglomerate of Slim-controlled telecom, banking, tobacco, retailing, insurance, construction, and other interests has been estimated to add up to 7 percent of Mexico's GDP. Even in his heyday, John D. Rockefeller accounted for only about 2 percent of the U.S. economy. As Forbes put it in its 2007 ranking of billionaires, Bill Gates or Warren Buffett would have to be worth $784 billion to have a similar share of U.S. wealth as Mr. Slim has of Mexico's wealth.
I should say this is an unaccustomed position for me. As an editorial writer at the Times and as editorial-page editor at the Los Angeles Times, I often found myself defending Big Business against a roomful of reflexively anti-corporate journalists. And, further bolstering my credentials as a capitalist apologist, my father was an executive for a large Mexican bottling company. But this is a bridge too far.
First, the scale of Slim's fortune, and the extent to which it was built on a government-sanctioned monopoly, is scandalously unique. This Wall Street Journal profile provides the background on how Slim leveraged his personal ties to then-President Carlos Salinas de Gortari (and his financial backing of the ruling party) not only to prevail as a bidder in the early 1990s privatization of Mexico's telephone monopoly but to ensure that Telmex remained a poorly regulated monopoly long after its privatization. Slim's companies still control more than 90 percent of all landlines in Mexico and more than 70 percent of all wireless contracts. Mexico's respected independent central banker, Guillermo Ortiz, has pointed to the lack of meaningful competition in Mexico, especially in telecom, as one of the factors retarding the nation's economic development.
Whether a weak Mexican state can develop and implement muscular antitrust policies to rein in the likes of Slim and foster greater competition is one of the keys to our neighbor's prosperity, which shouldn't be a minor story for an American newspaper. (And it could become a national security story. Stay tuned.)
As for Slim himself, he strikes many people as genuinely well-meaning and personally modest, a man very much engaged in philanthropic activities. How much of Slim's wealth is the result of his unfairly bullying would-be competitors and would-be regulators, as opposed to his business acumen, is open to debate, and I'm not one to begrudge a tycoon for looking out for his conglomerate's interests. If I were a tycoon, I'm sure I'd do the same.
But the question is not so much whether we should resent Slim's wealth. It's whether the New York Times really wants to tie its reputation so closely to his. Was there really no one else who had a quarter of a billion dollars to spare?
After all, Slim is someone that a Times editorial writer, Eduardo Porter, has called a "robber baron." (His piece ran in August 2007, before Slim made his initial investment in the Times.) Will Slim now be referred to as a "robber patron"?