Grupo Financiero Inbursa celebrated its 45th Anniversary in the new Soumaya Museum building, located in Carso Plaza, in Mexico City.

The Governor of the Bank of Mexico, Dr. Agustín Carstens, the Secretary of Finance and Public Credit, Mr. Ernesto Cordero and the CEO of Grupo Financiero Inbursa, Marco Antonio Slim Domit, attended the event.  In his speech, Mr. Carlos Slim Helú spoke about the difficult periods endured by the Mexican economy.

Mr. Slim stated that “we are living a moment of important changes, with new paradigms, where industrialized countries are called to modify and correct their policies.  The welfare State is facing chronic and structural problems and is no longer sustainable.  On the other hand, in developing countries like Mexico there are development visions and wide horizons for growth and prosperity.”

Slim pinpointed the case of Mexico, stating that in ten years it will substantially surpass the barriers of an undevelopped country, with the appearance of a larger middle class and greater activity aimed at the well being of all.


Statement by Mr. Carlos Slim Helú during the celebrations marking the 45th anniversary of Grupo Financiero Inbursa, December 1st, 2010.

Good evening every one.

I thank you all for being here with us tonight, in the 45th anniversary of the foundation of Inbursa.  Tony just mentioned some of the crises we’ve faced.  Nevertheless, allow to me comment and describe some of the difficult periods that we have undergone.

Several years before the foundation of Inbursa I was already an active investor.  It was the beginning of the sixties and we had some problems.  There were several strong movements in our country with the arrival of President López Mateos, the Bay of Pigs crisis and the strong pressure exerted by the Cold War.  The situation was quite aggressive in Mexico.  The government spoke of a “targeted left”, of the inclusion of extreme left policies in the Constitution and pertinently, of the need to find a balanced comprise between the two radical forces confronted by the Cold War.

This is why the economic situation was so difficult during 1960, 1961 and practically all of 1962.  Fortunately, we had a great Secretary of Finance and a great Director at the Bank of Mexico.  They both succeeded in offsetting these pressures through very active economic, monetary and fiscal policies.

And speaking about the Secretary of Finance, I would like to welcome the presence of Mr. Ernesto Cordero, as well as Mr. Genaro García Luna, and also of the Governor of the Bank of Mexico and all of you who have joined us here tonight.

At that time the Cold War had radicalized the situation.  The missile crisis of September 1962 marked the beginning of a new era.  The then Secretary of Finance, Mr. Ortiz Mena, conducted the country’s economy at a 6.8% annual growth rate during 12 years; with inflation rates close to 2%.  I believe this was one of the most dynamic periods between 1933 and 1982, when Mexico grew at a yearly rate of 6.2%

But what happened?  In 1965 we began to have problems. President López Mateos accelerated economic growth by relaxing fiscal policies. Mexico grew at a rate of 11% but with strong inflationary pressures.  When President Díaz Ordaz took office, the country’s finances were still managed by Ortiz Mena who slowed down the economy.  1965 was a year of adjustments.   After 1970, the world suffered from a global recession.  In 1970, 71 and 72 the world economy suffered.  In Mexico, on the 31st of August 1976 the Peso was devalued.  We had difficulties to handle currencies, exchange rates, related instruments, fixed interest rates, 9% upfront cash flow and in general, in handling all the policies that were correctly managed in the previous years.

As many of you might recall 1976 was a difficult year.   A friend of mine made an accurate comment about the fact that most of you present here were probably not even born when Inbursa was founded.  Anyhow, we are very glad to have you here tonight.

As I was saying, 1976 was a difficult year.  The political calendar did not help because politicians wanted a very strong government the year the presidential candidate was selected, then the following year during the presidential campaigns and finally on the last year, holding artificial exchange rates, as occurred in 1976 and 1982.

In 1982 we had another crisis. I believe this was the worst crisis I have witnessed in Mexico due to the generalized accuteness of the economic and financial problems and also due to the loss of confidence and an overall environment of mistrust and confrontation.

After a difficult 1986 when oil prices plummeted we were fortunate not to suffer from more extreme consequences.  We then lived the “1987 mistake”.  I believe the 1987 crisis was a mistake because Mexico had 14.5 billion in reserves which accounted for more pesos than we had ever had.  Unfortunately, some government officials in the economic and financial secretariats got scared from a drop in world markets that lasted one week.  You might recall that generalized fall of markets in 1987.

At the time, the Bank of Mexico decided to pull out of the markets and impose a huge adjustment policy that raised gasoline prices at 85%; inflation increased 30% from December 15 to January 15.  It was really a very, very difficult situation that even had political, electoral and other type of consequences.

As I was saying, the 1987 crisis was a sort of false crisis.  It was not only the consequence of economic nor financial factors. Then came the December 1994 crisis that you probably remember best. This crisis was sharpened in 1995 and persisted until 1996 until Greenspan made a call to order.  In 1996, Greenspan spoke of the irrational exhuberance of markets.

Even if he augmented interest rates, this was insufficient to correct that exhuberance.  In March 2000 there was a sharp fall in equity markets with corresponding effects in 2001 when share portfolios suffered losses, particularly the pension funds which plummeted from 30 to 40%

I believe that after the sad episode of September 11 some measures were undertaken in order to surpass the deep crisis.  Aggressive monetary and fiscal policies were adopted in May 2000:  interest rates were reduced from 6.5% in 2000, to 1.5% in 2001 and to 1% in 2003.  After that, as we all know, the wars against Iraq and Afghanistan began and an intense policy of Homeland Security took place.  This helped create a great number of new jobs but in the context of a big fiscal deficit as well as a big deficit in the trade balance of the United States.

In my opinion, these deficits and relaxed policies did not cease to exist when the American economy recovered in 2003, 2004 and 2005; and this is why we end up with the 2008 crisis.

I believe that what we lived in 1996, and was made public by Greenspan the head of the Federal Reserve, and persisted during 2000 and 2001, was a crisis that went far beyond the market exhuberance.  This crisis was not only the result of interest rates but, in my view, of a crisis affecting the industrial civilization as a whole.  The transition from an industrial society to a society of services brought about a set of sharp chronical problems in the world economy of industrialized countries.

Post War politics that favoured a universal welfare State, an omnipotent and omnipresent State, are no longer sustainable nor valid; and this is what we are still living today. We know that the US deficit is of a trade nature; they no longer produce goods and thus suffer from a trade imbalance that has persistently been financed by China, their main trade partner.

We witness today how the French are trying to increase the retirement age by 2 years or how medical expenses in the US are reaching 20% of GDP.  In the context of a generalized crisis of unemployment, industrialized countries have not yet corrected their policies.  They continue to apply ancient economic recipees that are completely inadequate to correct their main problems.

If we ask ourselves which countries are now urged to adjust their policies, we will find the answer in Europe.  The US continues to apply relaxed policies, with substantial negative interest rates, an aggressive depreciation of their currency, extremely big fiscal and trade deficits and high unemployment.  They are also putting a lot of pressure on the price of commodities that do not really matter.  For instance, if the price of gold increases or decreases it doesn’t really matter.  But if the price of food supplies increases this might bring about social problems.

I believe the US and the rest of the industrialized countries should correct and change the retirement age which is now established at 60.  I know this is politically and socially difficult.  Today, people live till the age of 85 and our youngsters will certainly live till the age of 90. When people reach a certain age healthcare becomes really expensive. They cease to produce goods and join the unemployed.  When productivity improves there is no new job creation for a new society.  These are some of the important issues that matter.

It seems clear to me that a firsthand solution would be to increase private investments. This is particularly true in our new civilization characterised by a new technological society, more global, with more competition, productivity, innovation, flexibility, rapid action and adjustment to change.  With no doubt  civil society and the private sector are better suited to meet this challenge.  Certainly, in the future there will be more civil society participation, more private investments and more public and private partnerships.  It is common that fiscal revenues go first to social expenditure than to public investments.  State income should be directed to those areas so as to allow private investments to focus in other sectors.

I am talking about what we see in industrialized countries where welfare State policies are still being applied.  This kind of policy is particularly acute in France where we recently saw how a proposal to increase the retirement age from 60 to 62 provoked a general strike with massive protests and marchs and a lot of pressure. If the government wants to apply these corrections, this will happen again.

On the other hand, what happens in countries like Mexico? What happens in developping countries?  I believe that in our emerging and developping economies we enjoy an enviable situation like never in the past. I can even say that I have never perceived so many opportunities.  As Tony just mentioned in his speech, this crisis brings about more opportunities.  With no doubt this is the case of Latin American and Asian countries where retirement problems are easier to solve as well as healthcare needs and all other services required by the population.

These countries are better suited to meet the challenge in the medium term. Authorities among us tonight certainly know better than I.  But I trust that we can live with lower interest rates when it comes to long term financing.  This will allow for practically any investment to be profitable; and this is an advantage.

Another advantage is that any surplus will become a reason to promote economic activity.  When savings become investments they generate economic activity thus creating jobs. We have a great potential to turn our surplus into investment, fostering the economy and increasing employment.

Furthermore, a lot of people are no longer limited to self consumption practices.  They are entering the market, improving the prices for primary goods.  In the case of Mexico, we know we have oil, but also mining which has been historically important to us.  The agricultural and livestock sectors will also become important factors of worldwide attention.

To summarize I would like to say that we are living in a moment of important changes, with new paradigms, where industrialized countries are called to modify and correct their policies.  The welfare State is facing chronic and structural problems and is no longer sustainable.  On the other hand, in developing countries like Mexico there are development visions and wide horizons for growth and prosperity.

Lastly, I would like to mention the case of those countries that have succeeded in growing and developping themselves.  Like Mexico, they have reached a certain level of prosperity, surpassing the poverty barriers and attaining per capita incomes of 10 to 12 thousand dollars. If their currency is not overvalued, these countries will hardly go back to underdevelopment.

Today we witness the European crisis, including the one suffered by Spain which is facing big problems. But GDP per capita might go down from 35 to 33 or 30 thousand dollars.  It is unthinkable to imagine Greece, Ireland, France or Portugal going back to underdevelopment, or Korea in Asia where poverty is now history.

I am very optimistical about Latin America and Mexico surpassing this barrier, with no doubt, in the next decade. Our per capita income is now at 8,500 dollars but I believe we will go beyond this line in an assertive manner.  Larger middle classes and a greater economic activity will appear to sustain the well being of all.

I would like to stress my concern about what is happening in Europe.  We get the impression that if European countries do not change, they will be trapped in a sort of standstill with big unemployment and great monetary, fiscal and trade problems.   But I would also like to underline the great opportunities offered by countries like Mexico, so that we can progress and come out of this long period of many years of crisis, when we had so many shortcomings.

Thank you very much.

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