Slim Sinks $3.6 Billion Into Mexico

| Feb. 4, 2011 |

Published by Minyanville

World’s richest man Carlos Slim gave his home country’s economy a huge boost this week, as he announced a $3.6 billion investment into Mexico’s telecommunications, mining and infrastructure industries.

The boost is some 20% of Slim’s current investment in the country. He claims that drug violence, which has pushed a lot of business away from Mexico, is no deterrent to investment. "Whoever doesn't invest, be it out of fear or caution, will be left behind," he said.

America Movil (AMX), the continent’s largest mobile phone network, will swallow up 10 billion pesos. The company is to spend $8 billion a year through to 2014 as it anticipates more data demand from the internet.

Mexico’s top landline provider, Telefonos de Mexico (TMX), will take in another 10 billion pesos. Slim’s Grupo Carso spin-off Frisco saw shares steady after their initial steep 95% rise from 35 pesos at the start of January to 55.99 towards the third week of the month, where they finished at 53.29. Another 10 billion pesos is earmarked for the mining company.

Frisco produced 199,791 ounces of gold and 5.5 million ounces of silver in Mexico in 2010. The company expects to expand output in 2011 as it expands exploration.

Slim’s total investment will be $8.3 billion, the remainder across Brazil, Colombia, Peru, Chile and Argentina.

With the Middle East and Africa, notably Egypt, accounting for 7.5% of Cemex’s (CX) 2009 revenue, events in Cairo caused stocks to fall 0.4% to 11.41 pesos this week. The company also reported a larger-than-expected fourth quarter loss. Protestors in the Egyptian capital are taking to the streets to demand President Hosni Mubarak resign after thirty years in power.

At the World Economic Forum in the Swiss resort of Davos, Mexican Presdent Felipe Calderón felt compelled to defend Mexico’s destination for investment as his government’s war on drugs has led to more killings every year since its inception in December 2006.

The President touted Mexico’s 5.0% growth in 2010, along with the addition of 800,000 jobs. However, Mexico’s gray economy, with its street vendors, flanaleros and a huge number of unknown workers, puts paid to that figure.

“We receive $19m of direct foreign investment," he said—a more than 50% increase on 2010. "Despite the very challenging times we have experienced and very important action the federal government has been promoting, despite the violent actions of criminals, mostly in fights with other criminal groups and cartels in Mexico, we have seen these growth rates," he added.

US software giant Microsoft (MSFT), however, brought the link between software piracy and Mexican drug cartels to the attention of the Global Congress on Combating Counterfeiting and Piracy. In Paris, the company showed off a fake copy of its Office 2007, stamped with “FMM”, a trademark of the notorious La Familia cartel.

Back in Davos, President Calderón boasted of Spanish electricity company Iberdrola’s $365m investment into Mexico, including a wind farm. He also mentioned Canadian car-part manufacturer Magna’s investment of over $100m in the country.

Mexico’s strengthening car industry received another boost this week as Volkswagen announced plans to build an engine plant in the central city of Silao, in the state of Guanajuato. Seven hundred jobs are expected to be created thanks to the $550m investment.

The industry also saw positive results from Alfa, which announced fourth-quarter profits up 28%, thanks so a surge in demand as well as an acquisition by the company’s food unit. Alfa’s shares rose 4.8% to 138.41 pesos this week.

The value of the peso against the dollar slipped during the week ending at 12.0485. This is slightly higher than last week’s (Thursday) end of 12.026.

The IPC index followed suit, falling 0.5% to 37,767 points. The index has been rising swiftly recently however, peaking on January 5th at 38,696 points. The fluctuation is thought to be due to the Mexican economy’s close links to the United States’, with 80% of Mexican exports heading north. Remittances, money sent back to Mexico by migrants in the United States, is another huge basis for Mexico’s economy.

A week after Secretary of State Hillary Clinton visited Mexico, relations with the United States continue to be volatile. An American citizen was killed by gunmen as she and her husband drove in the north of the country, just across from the Texan border. Nancy Shuman Davis, 59, and her husband were missionaries in Mexico.