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"?
The beauty of this deal for the Sulzbergers is obvious: It gives the company desperately needed cash without forcing the family to relinquish any further control. That family control has been the guarantor of the newspaper's prized independence.
As for Slim, he knows exactly what he is doing. I expect him to play his self-effacing, I-won't-interfere, don't-even-give-me-cookies-if-I-drop-by role perfectly. He won't throw his weight around, as he did when he reportedly tried to prevent Mexican author Denise Dresser's popular satirical history of Mexico (with critical references of him) from being sold at his Sanborns stores. (And again, I should confess that I am a huge fan of Sanborns. Among the world's quirkiest retailers, it is a place where you can buy fresh Mexican pastries, American magazines, Japanese TVs, Cuban cigars, French ties, or merely head for the lunch counter to have some of their famous enchiladas suizas.)
The point is, Slim doesn't have to interfere at all. I know from experience that publishers do intervene in the editorial process, as is their prerogative. And I can assure you that Slim's investment will be a factor, even if unspoken, in editorial decision-making henceforth at the Times. Perhaps Mexico's crony capitalism will remain a mostly neglected topic—but now conspiracies will be read into the neglect.
Slim wins either way. When writers and editors do lob an occasional piece into the paper critical of Slim, and they will, he will then be able to brag about it back home, absolving himself of charges of being a thin-skinned bully. Indeed, the conspiracy theory will then become that he ordered the Times—which everyone in Latin America will assume he controls, regardless of the reality—to be critical of him.
Setting aside any specific content in the paper, the mere fact that the Times Co. has allowed itself to become so dependent on Slim's fortune provides him with a priceless seal of approval. It becomes easier for him to write off his critics in Mexico as perennially frustrated leftist whiners. If any of what they alleged were true, after all, would the enlightened and liberal New York Times allow him to become one of its largest shareholders? Slim is lending money to the Sulzbergers for the same reason he has donated to Bill Clinton's foundation.
As for the Times, the newspaper is taking on an untenable appearance of a conflict, if not the reality of one, of the type it typically rails against in other institutions.
The prestige of the New York Times is such that it wields an unparalleled moral suasion. A few years ago, I wrote a Times editorial making the point that in flirting with succeeding her husband as president, Vicente Fox's wife was threatening to make a mockery of the nation's democratization. The Mexican press treated the editorial as news in itself, and Mrs. Fox backed down. (We were, to be sure, not the only ones making the point.) But from now on, any Times utterances on Mexico will now be interpreted, fairly or not, through the prism of Slim's stake in the company.
Such second-guessing will not be limited to news about Mexico. When the Times is tough on Hugo Chavez, the Venezuelan leader can accuse the paper of doing its favorite investor's bidding. (Slim has businesses throughout Latin America.) And when the Times writes about extreme wealth concentration in other developing countries or unseemly business monopolies in Russia (or here in the United States, for that matter), second-guessers will ask why the paper of record doesn't take a closer look at what its white knight, Mr. Slim, is up to in Mexico.
The New York Times is facing difficult times, and it's easy to understand why it made this deal. But in the long run, in terms of the newspaper's global brand, that $250 million may appear far costlier than the high interest payments Slim is now due.