Grupo Carso’s Plans for 2011
Mr. Carlos Slim announced that Grupo Carso will invest 44.65 billion pesos in 2011, meaning a 13.6% increase from the year before.
Mexico City, January 31st, 2011
 back |
Page 4 / 6 | next |
Mr. Carlos Slim Helú press conference, January 31st, 2011. (continue)
Question: You have spoken three times already about a national and worldwide concern about the price of food. What would you advice to the Mexican authorities in agricultural and rural areas? Have you ever thought of investing in that area?
Carlos Slim Helú: The first thing is to communicate about the urgency of this reality and insist about it at world fora, international financial events, at the meetings of the Monetary Fund, at Davos, and all these places. We have to make it clear that if the price of gold or silver doubles nothing substantial will happen. But if the price of wheat increases twofold or threefold, then the price of steel doubles, and the same occurs with copper and food in general, everything increases twofold and we have a catastrophe, it is a serious problem.
The situation has improved a bit because the peso has recovered its value; it used to be 13 to the dollar and now it is 12, so even if what used to cost ten dollars now costs 15 or 14, the resulting price in pesos is actually 10% less. But if this goes on for several years and the Americans dilute their debt through inflation, the result can be catastrophic. It is important to in world forums that US policies can be catastrophic, and suggest they implement different policies such as accumulating reserves of food products instead of dollars. This is what China is doing, for example. China has diversified its reserves. Alongside currencies, they are accumulating reserves in iron, scrap-metal, scrap-copper, copper, etc. The United States used to have strategic reserves of nickel. I am not sure it they still do.
I think that there are possibilities in the accumulation of strategic reserves. We should also try at international level to reduce speculation. Of course speculation brings liquidity to the market, but when it becomes gamble it can have negative consequences, so I would eliminate the gambler factor. This can be done by giving higher guarantees of 15% instead of 5%, except for producers or consumers, which have a different status. It is evident that if the price of maize continues to increase (the price of corn and wheat products increased recently), as well of the price of steel, copper, lead, zinc and paper we will face a serious problem. He should preview these issues and be prepared for them, so that we can manage these increases. I believe that reserves in commodities may turn out to be a better bet than reserves in currencies, especially since those deposits are fragile, they are short-term deposits that fluctuate in response to exchange rates, attractive interest rates, revaluations, etc. than can exit the market at any time.
Another viable option is to keep reserves of certain strategic or important goods, to protect us against speculation in food supplies. This is something that can be done at the producer level. For example, the producer adjusts its price, so instead of increasing reserves in dollars one could have reserves in food products.
Question: Is América Móvil planning to invest in contents?
Carlos Slim Helú: We need to promote the development of contents and applications. You must remember that, in general, applications are created by people who work and invent freely from their homes. We would like TELMEX to support this work, and América Móvil for the rest of Latin America. In other words, we want to support young people like the ones that came to the Digital Village promoted by TELMEX. There were 3,500. We gave them 20 Gb for a couple of days. Do know how much is 20 Gb? It’s 20 thousand Mb, and one megabyte is quite a lot already. So we gave them 20 thousand Mb. Now, we should give more time to those willing to engage in research and development of technology. We should offer them our support, supervision and help. We support the development of different types of software companies and we would like to continue doing this in a larger scale.
You haven’t asked me any questions about our most important project, which is the Digital University. This will offer a great opportunity for young people who cannot study because there’s a lack of classrooms and teachers in higher education. With the support of existing technologies we want to offer an alternative form of education, distance, high-quality education. In other words, students will not need to be physically present in the classroom with the teacher.
Question: Are you planning to do this with your Digital Libraries?
Carlos Slim Helú: We will do this with a broadband connection that you can have at home or at your friend’s home. Everybody will be interconnected and, of course, the Library will give connection to those not having it home. Anyone can connect from any other place which has free broadband availability and good speed.
Question: I would like to ask you three questions about the foundations. What motivates you? How did you conceive these projects? What do you expect from them? This kind of projects are generally understood as philanthropic, and many people are quite moved by what people like Bill Gates and Soros do. How do you see them, as an investment, as a donation? And finally what do you expect from them? Governments give much more than any private citizen in order to solve great problems, what do you expect to achieve?
Carlos Slim Helú: It is a challenge for me. As I have often said before, I believe it is very important to invest in the social sphere, as well as in health and education, especially since we are not geared by political or electoral patronage. Public education is very important, and so is public health. The more education and nutrition the easier it will be for a person to rise from poverty. Education gives them better job prospects, together with a sane economic activity. It is not only a question of helping poor people overcome their situation and enter modernity, but to do it with dignity. These people will no longer be used to receiving a certain amount of money to solve immediate problems. Their job will not be to stand in line for hours outside some government agency to get coupons or handouts. Education and health are of the utmost importance.
On the other hand, as you correctly pointed out, governments all over the world spend hundreds of billions of pesos and dollars that no private donor or charity foundation can match. How much can these private donations represent in terms of investment? not even one per cent, not even one per thousand. But what entrepreneurs can do, especially in this new modern civilization, this civilization of knowledge, globalization, flexibility, innovation, competition, and technology, is use their know-how on human and material resources, to solve problems in a quicker and more direct way. We have a more complete and longer-term vision about the economic situation than politicians do.
We must try to solve social problems, identify the areas that lag behind, try to solve marginalization, work both in education and health. We must strive to solve these problems at the national level, and at the end of the day the best way to solve them is through economic activity and employment. I believe this is our objective. Handouts are not the solution. Imagine for a moment that I decide to sell everything I own and donate it. What would happen? We sell TELMEX and América Móvil (obviously to some foreigner, I don’t think any Mexican national could buy them), sell the mines, sell everything, and then pay tax on the sale. We then divide what is left amongst all the Mexicans and as a result we give each person 400 dollars. And then what? You see, it doesn’t work that way.
We succeeded in innovation with projects such as the pre-paid telephone, which is like an extension of a public telephones into a cell phones, allowing for almost 100% of the population in Latin America to own a cell phone. This gives us 100% penetration in Latin America and increases our productivity. We developed this system in 1996 in response to the crisis in 1995. But has been so successful that it is now being applied all over the world. But not only that, I always supervise that companies belonging to our Group respect and take care of our partners and have a sense for social problems. For example, when Frisco opens a factory we always talk to the State authorities to discuss the implementation of our project in respect of regional needs and requirements. As regards employment we will offer 6 thousand temporary and 3 thousand permanent jobs. And we will also prepare local people so that they can benefit from the indirect employment generated by the project. Together we can increase the level of the entire local economy.
If you think about it, the most beautiful cities in Mexico have a mining origin: Taxco, Zacatecas, Guanajuato. These cities were built by mining companies that remained there for many years and developed great projects. We can do the same today, with the participation of locals, offering them higher education, better job opportunities, a good quality professional career and a better socio-economic level.
If we talk about telecommunications, regardless of our access to pay television or not, we are still investing because this is the central nervous system of the new civilization. If TELMEX does not invest nobody will, neither foreign investors nor national investors. Without that infrastructure Mexico will be in trouble. It is worse than having no roads. Without our presence in the mobile phone industry or without our fiber optics network, Mexico would be in trouble. We are developing these areas both here and in the rest of Latin America.
Telecommunications is clearly a need, a reason and a cause for improving the economic situation of the population. People in rural areas no longer have to travel far to buy goods or see the doctor. We are working with our research institute in the concept of telemedicine. If you want I can comment on this, or Marco Antonio can tell you about it.
Coming back to our conversation about universities, the Rector has recently stated that there are 7 million youngsters with no education or job. This situation is critical. It would be difficult to double the capacity of existing universities, let alone satisfy the need of those 7 million people. The National University of Mexico has 300 thousand students. How can one pretend to create 20 new universities? You can’t, there is no money, no resources, no classroom space, nothing. The only solution is technology. And what is this technology: broadband and good quality, open, off-campus education programs.
We need to determine the most important degrees so as to design the appropriate programs. In some cases our companies work in partnership with a foundation. A good example is mining, where there is a need to prepare people to hold jobs in the industry. There is a need for mechanical engineers, drivers, firemen, welders, etc. In other words, one offers education and training while satisfying the needs for qualified labor. The challenge is to create a better situation for everybody thanks to a healthy economic activity.
For example, the University project is being carried out exclusively by the foundations, but it relies on TELMEX infrastructure. TELMEX has an interest in the project since investments will probably bring benefits in three years, once everybody has been connected and TELMEX has obtained higher customer fidelity. Someone asked me if we were going to offer the same speed as other companies. The answer is yes, of course, and not only that. A good part of our customer fidelity derives from the fact that they’ve experienced TELMEX’s service for 20 or 15 years now and they realize that, for the same price, and without much ado, we went from 250 Kbs to 5 Mb.
You cannot fight poverty with charity or donations, but through social expenditure, especially in public health and education. I strongly believe that the private sector is better at doing this than the government. Every time the government increases taxes (and I don’t mean only the Mexican government) the deficit increases and they face more commitments. It gets more and more difficult for politicians and public officers to think about mid and long-term investments. Everything is dedicated to cover current expenditures. This is the origin of the crises in Europe and the United States, where the state follows a social welfare model. After the Second World War the economy began growing enormously and so did tax collection, so eventually the state acquired commitments it could no longer fulfill, such as early retirement and free public health. I don’t know if you’re aware of this but when a foreigner gets ill in Spain he/she is entitled to free health services. Sick people go to Spain to be cured since health services are good and free. The same is true regarding unemployment benefits. These things may be possible under normal conditions, but not in the context of a crisis. The result is that countries like France and Spain, which have a tax collection rate of around 40%, and a deficit of 10 or 12% without visible possibilities of recovery, find it very hard to maintain their promises. When life expectancy goes from 80 to 90 years they have a lot of trouble increasing the retirement age just for couple of years. All these problems are the consequence of a lack of political strength to modify the omnipotence and omnipresence of the state. In other words, we need the private sector to take care of these issues. There are many factors involved. We are convinced of what we do. With the help of TELMEX and all volunteers that gladly work in the different projects, we can always meet our challenges and tackle our problems. This applies to digital education. We don’t have a fixed budget. We just identify the problem and do as much as we can to solve it, as we did with our program for out of hospital surgeries. We began with two thousand surgeries and last year we performed as many as 119 thousand. We will also do our best in education. We will invest as much as necessary to create academic programs; this is the main bet. We already have the network and we are seeking mobility. We have no established limits; our only limit is our ability to implement our ideas.
Question: What about your proposal to standardize value-added tax (VAT) at 12%, eliminate the entrepreneurial flat tax (IETU) and lower the Income Tax (ISR)?
Carlos Slim Helú: You haven’t understood it properly. It is not a matter of decreasing VAT to 12%, but rather to reimburse 3% to whoever pays 15% VAT. It is a measure to collect more tax and to keep better track of it. This also increases the incentive for the consumer to ask for his/her receipt. Chile and Brazil have already applied similar strategies. In this way, every consumer becomes a sort of inspector who helps formalize the taxing process, because it will be in his interest to demand the receipt, which will in turn grant him/her a 3% refund. I also believe there should be a basic basket of goods exempt from this tax. Regarding Income Tax, I understand they might eliminate special regimes, so that all tax payers over a certain income level will pay in accordance to that level, thus protecting the small tax payer. This is important for small business owners. The owner of a small company should be aware of this fiscal regime. If a company earns between one and eight thousand pesos, or maybe 4 thousand, or above a certain minimum it has to pay taxes. Still, you may find yourself in some specific activity where you can still make money and pay no taxes. And that’s fine. I agree entirely with the idea of having a basket of tax-exempt basic products so as to avoid the food-price increase I spoke about earlier. The VAT reform should therefore not imply a reduction to 12%, but a 3% refund for those customers who keep their invoices. Regarding Income Tax, it is important that this does not reduce tax collections. They should first see how the process will result and how the collection will take place. As a result of the crisis in 2009 some taxes increased temporarily, such as the 3% increase on telecommunications and the 1% increase on VAT, but this crisis is now over.
Question: Regarding the fiscal proposal that will soon be discussed, what is, in your opinion, the incentive for political parties to approve the fiscal changes that may give people greater opportunities to consume, especially considering that we will have presidential elections in 18 months?
Carlos Slim Helú: That is their incentive. All three parties hope they will reach power. They all prefer to have a stronger fiscal regime with a good collection system that eliminates tax evasion. From a national and economic point of view a proper reform is needed, which does not reduce the state’s income, but that will promote economic growth. I would say it in one phrase: the main instrument of economic policy is fiscal policy; and therefore we need a fiscal policy that is not only aimed at collection but serves as a strong economic instrument, an instrument of economic policy that promotes growth. One should also avoid the omnipresence of the state, a model that is falling apart everywhere.
Question: What are your investments in Europe? Are you contemplating more investments in countries like Germany?
Carlos Slim Helú: We don’t have any investments at the moment in Europe, except for a small cable factory in Spain that caters for the automobile industry. That’s all we have in Europe. There is no specific reason for this, what happens is that we have very good investment opportunities and large operations where we are, which is mainly Latin America. I am talking about operational investments, not securities. There are very interesting opportunities for passive investments in Europe.
Question: Regarding organized crime, there is a lot of talk about the economic power of criminals at this moment. There are some private companies that are being influenced, especially for money laundering, covering illegal activities, and other related things. What measures have you taken to prevent this sort of financial capture by organized crime?
Carlos Slim Helú: I don’t understand your last question very well, but our financial group has been paying costs through checks, not cash, for a long time. There are no illegal resources directed to other purposes. INBURSA has been doing this for 45 years now. On the subject of money laundering, in INBURSA we have taken very seriously our belief that we must know our clients well; we must have some background, as well as supervise and report any suspicious or relevant situations. Also we don’t do business in dollars with those who are not our clients. Nobody can walk into an INBURSA office and exchange dollars. These are the measures we have taken and there is strict supervision in order to prevent deviations.
I think it is a very complex problem, we need to find a solution to this but Mexico and the Mexican government cannot do it by themselves. There is a large market in the United States and another one in Europe as well as an ever-greater number of consumers in our countries. This can be considered as retail. The current equation between the United States, Mexico and Colombia is completely unfair since they keep what they are consuming plus the money, while we get to keep the weapons and the violence. There is an enormous imbalance. This is a problem we will have to study with much care and see where it is going and what possible solutions we can find. This is a problem of great magnitude and we must find a solution.
