Excerpted from Bordering on Chaos - Guerrillas, Stockbrokers,
Politicians and Mexico's Road to Prosperity.
By Andres Oppenheimer. First published by Little,
Brown and Company.
Reprinted with permission of International Creative Management, Inc.
Copyright (c) 1996 by Andres Oppenheimer. All rights reserved.
Nothing made Zapatista leader Subcommander Marcos's claims that Mexico's
political system was hopelessly corrupt more apparent than a private dinner
party held at the home of former finance minister Don Antonio Oruz Mena to
raise funds for the ruling party's I994 campaign. It was one of those
high-level, top-secret meetings that seem to exist only in the minds of
conspiracy theorists--but that turned out to be real.
The party, attended by President Salinas and Mexico's top billionaires, was
supposed to have remained a confidential affair. It had taken place on a
Tuesday evening about ten months before the Zapatista up rising, on February
23, 1993. It was 8:30 P.M., and one by one, the thirty wealthiest men in Mexico
(there were no women in the group) began arriving in their limousines at the
mansion of Ortiz Mena at Tres Picos Street Number 10, in Mexico City's
exclusive Polanco neighborhood. Their invitations had asked them to attend "a
small dinner party" --a code for no wives included and no word out to the
media-- with President Salinas.
The agenda of the secret meeting, as specified in the invitation letter, was
to discuss a five-point program to help prop up the PRI for the 1994 elections.
After more than six decades in power, the PRI had become rusty. It was in
urgent need of updating its ideological platform and campaign strategies to
confront a growing challenge from the left. Among the points to be discussed
were rewriting the party's platform to reflect the new closeness with the
United States and support for free market policies, shoring up the party's
grass roots support, and discussing the upcoming electoral campaign
fund-raising drive. The key proposal to be discussed called for getting the PRI
to raise its own funds instead of continuing to receive massive government
financial aid. Mexico could no longer afford to be described by critics at home
and abroad as a state party system. The time had come for the PRI to sever its
financial ties with the government and help give Mexico a democratic image.
PRI president Genaro Borrego had organized the dinner with the help of two
business leaders close to Salinas--banking tycoon Roberto Hernandez and
construction magnate Gilberto Borja. Borrego and the two businessmen had met
several times at the PRI headquarters and for breakfast at the University Club.
They had planned everything to the last detail, from the list of the guests to
the order of the speakers to the menu. Now, after weeks of preparations, their
banquet was about to begin.
A uniformed watchman guided the guests, most of them overweight,
folksy-looking men in their late fifties, to the elevator that took them to the
second floor dining area. It was a big room, decorated with sixteenth-century
French furniture and original paintings by muralists Diego Rivera, David Alfaro
Siqueiros, and Jose Clemente Orozco worth several million dollars. In the
middle of the room was a U-shaped table, with the guests' place cards in
alphabetical order. Facing the center of the table, between its two open wings,
was a small table for three: Salinas, PRI president Borrego, and the host.
None of the visitors looked at the paintings: They had them by the dozens.
Among the guests were television tycoon Don Emilio Azcarraga, known as El Tigre
("The Tiger"), described by Forbes magazine as the richest man in Latin
America (the magazine estimated his net worth that year at $5.1 billion);
telecommunications czar Don Carlos Slim (net worth: $3.7 billion); cement baron
Lorenzo Zambrano (net worth: $2 billion); Bernardo Garza Sada (net worth: $2
billion); Jeronimo Arango (net worth: $1.1 billion); Angel Losada Gomez (net
worth: $1.3 billion); Adrian Sada (net worth: $1 billion); and Carlos Hank
Rohn, whose multimillion-dollar fortune was almost entirely in family-owned
businesses and thus unaccountable. Mixed with the guests were party organizers
Borja and Hernandez, who had--as an additional show of support for the
party--provided the Paris-trained kitchen personnel of his Banamex bank to
cater the event.
Last to join the party, at nine P.M. sharp, was President Salinas, according
to several of the guests. Everybody applauded the minute he entered the room.
After greeting most of those present with ear-to-ear grins and bear hugs,
Salinas took his seat at the smaller table. Dinner was served. There was smoked
salmon as an appetizer, followed by steak au poivre. The atmosphere was joyful.
Word had gotten out that the business leaders would be asked to raise funds for
the PRI, and the government leaders and the business tycoons were exchanging
barbs about the project in front of an amused, good-spirited president.
"Well. how much are we supposed to collect?" Borrego was asked by one of the
business leaders shortly after they had begun to eat.
"Mucho" ("a lot"), Borrego responded, smiling.
"But how much?" the business tycoon insisted.
"Muchisimo" ("a whole lot"), Borrego responded, drawing laughter from around
Nearly an hour later, when everybody was having dessert--vanilla ice cream
topped with melted chocolate--Ortiz Mena, the host, stood up. He hit his spoon
several times against a wine glass and asked for silence. Ortiz Mena introduced
the first speaker, Borrego, who quickly ran down the five-point party
modernization program. The August I994 presidential election was getting close,
and the PRI faced a serious challenge from the left, the PRI president
concluded. It was crucial that all the business tycoons around the table make
major contributions to save the PRI-- and the country, he said. Salinas, his
eyes on the ceiling, nodded. Ortiz Mena followed suit, recounting the PRI's
history and stressing the ruling party's role as a social glue that had
prevented Mexico from exploding into chaos and bloodshed throughout the
country's history. Salinas closed the presentation, saying he wholeheartedly
supported the proposed reforms to re-energize the party.
Okay, the business leaders said, nodding to one another. There was general
support for the idea of stopping the flow of money from the government to the
PRI and getting the party to raise money from the private sector. But how much
were the business leaders supposed to fork out? The conversation went back and
forth. Officials at the head table at first avoided giving a figure, then
suggested that the PRI needed a campaign chest of at least $500 million. Then,
Salinas's friend Roberto Hernandez, the banker, threw out the figure that had
been previously agreed upon between the three banquet organizers during their
breakfast at the University Club.
"Mr. President, I commit myself to making my best effort to collect
twenty-five million," Hernandez said.
There was an awkward silence in the room.
"Mexican pesos or dollars?" one of the billionaire guests asked. "Dollars,"
responded Hernandez and Borrego, almost in chorus. Twenty-five million
dollars each? ! There were hmms and ahhs around the table. Don Garza Sada, of
Monterrey's Visa soft drinks empire, said he agreed -- it was the business
community's responsibility to support the party Telecommunications magnate
Slim, who had won the government bid to privatize the national telephone
monopoly, supported the motion, adding only that he wished the funds had been
collected privately, rather than at a dinner, because publicity over the
banquet could "turn into a political scandal." In a country where half the
population was living under the poverty line, there would be mediate questions
as to how these magnates --many of whom had been middle-class businesspeople
until the recent privatization of state companies-- could each come up with $2
5 million in cash for the ruling party. Charges of massive corruption under the
Salinas administration were bound to surface. At that point, department
store magnate Angel Losada took the opportunity to voice more personal concerns
about the proposed contributions, witnesses say. Collecting $25 million was an
exorbitant task for somebody like himself, he said. He was small compared to
others at the table. He couldn't even dream of coming up with that kind of
money for a political contribution. He had just formed a joint venture with
U.S. investors. What would his American partners say if he pledged $25 million
for the PRI?
Before other reluctant contributors could join Losada in voicing their
opposition to the enormous sum that was being requested, television baron
Emilio Azcarraga stood up, full of enthusiasm, to make his pledge. The minute
he rose from his chair, the room went silent. Azcarraga was the biggest among
the big -- not only financially but physically. An imposing man of six feet two
inches, he commanded instant attention --and some fear-- wherever he went. He
could be brutal with his aides and would often publicly embarrass almost
anybody but the president. He gave a vintage Azcarraga performance: loud,
arrogant, and grandiose.
"I, and all of you, have earned so much money over the past six years that I
think we have a big debt of gratitude to this government," Don Emilio said.
"I'm ready to more than double what has been pledged so far, and I hope that
most in this room will join me. We owe it to the president, and to the
Everybody raised his eyebrows. Azcarraga was talking of pledging more than $50
million. President Salinas. smiling broadly, applauded. Others followed suit. A
few did their best to smile, still dumbfounded. Don Carlos Slim, trying to
break the ice, said he would be delighted to give as much as Azcarraga -- if he
had his money. The room broke into laughter as many wondered aloud whether Slim
wasn't conveniently playing down his fortune. The men around the table began to
tease one another about who was in a position to give more and who was making
more money at the expense of whom. But whatever protests had been uttered about
the size of the pledges were clearly obscured by generalized acceptance. Ortiz
Mena and Salinas looked pleased.
By midnight, when the president left, Mexico's wealthiest business men -- had
committed themselves to contributing an average of $25 million apiece to the
ruling party, for a total of about $750 million. The men swore themselves to
secrecy, slapped each other on the back, exchanged the last jokes of the
evening, and walked out to their limousines.
The PRI needed the money badly, and not just because it wanted to avoid an
embarrassment during the electoral race over the massive financial help it had
long received from the government. After decades of functioning like a de facto
government agency that got its money directly from the Finance ministry, the
PRI was discovering that the flow of government funds was running dry. A few
months earlier, Finance Secretary Pedro Aspe had sent a memo to party president
Borrego informing him that the central government would no longer finance the
The memo didn't put a complete stop to the flow of government aid to the PRI,
But Borrego was under growing pressure to find new sources to cover an
estimated $1 billion in government funds that was wire-transferred every year
to the party headquarters, most often disguised in the government's budgets as
disbursements for public works. In the past, the PRI president had only needed
to ask for the money to get it. And if for some reason or other the transfer
was delayed, there was always the national lottery. "The national lottery is
the party's petty cash," a top PRI official familiar with the party's finances
explained to me matter-of-factly. "Whenever we need a few million from one day
to another, there's where we get it from."
Aspe, a conservative economist with top connections in the world financial
community, had explained his memo to Borrego as part of the government's
overall policy of reducing public expenses. Just as the government was
privatizing state enterprises and reducing subsidies across the board, it
needed to make drastic cuts in its financial support to the PRI. The party
needed to generate its own resources. Borrego, a reform-minded economist,
supported the idea--even though it would make his life as party president more
difficult, according to participants in the talks. He was sensitive to
criticism from Mexico's opposition that the country would not be democratic
until the ruling party became independent of the government and allowed a fair
competition among all parties. Like many young party leaders, Borrego believed
that Salinas's bold economic reforms had to go hand in hand with political
reforms to turn Mexico into a truly modern democracy.
Borrego had heard that the PRI's local chapter in Mexico state had created a
blind trust to which the state's most powerful businessmen had contributed
enormous sums, making it virtually independent from government resources. After
discussions with Salinas and separate meetings with Hernandez and Borja, he had
instructed an aide to mail the invitations for the banquet. There was no time
to waste. The finance secretary was threatening to shut off the flow of funds,
and the August elections were nearing. What none of the fund-raiser's
organizers suspected at the time was that it would become a major political
The banquet at Don Ortiz Mena's residence created a public uproar over the
months that followed, when details of the meeting began to make their way to
the press, not the least because the pledges made that night were a
mind-boggling sum by international standards. How could these billionaires
pledge so much so fast? Mexicans from all walks of life would ask themselves.
What kind of favors would these chosen few get in return for their political
contributions? The billionaires' pledges were a startling symptom of the
massive corruption in Mexico's official circles--a world where publicly
disclosed funds amounted to a small fraction of the fabulous sums that were
moved under the table.
Mexico's gross domestic product barely reached 5 percent of the U.S. economy
and amounted to that of the state of Ohio, yet Ortiz Mena's guests had pledged
more than five times what the Democratic Party had spent in the 1992 U.S.
presidential elections. Compared with the largest single contribution to the
Democratic Party that year-- $398,876 from the United Steel Workers of
America--Azcarraga's single offer to donate $50 million was gargantuan.
But, more importantly, the pledges were obscene in light of Mexico's
generalized poverty and of the rapidly growing gap between the rich and the
poor. Under Salinas, the concentration of economic power had reached record
highs, and little effort had been made to increase the new billionaires'
contributions to society through increased taxes or charity ventures. The
privatization of hundreds of state enterprises --and their purchase by a select
group of presidential friends-- had led to the creation of giant business
empires and to an increasingly skewed distribution of wealth.
By the early nineties, the wealthiest 20 percent of the population was
receiving 54 percent of the country's income, while the bottom 20 percent was
getting only 5 percent of it, according to the government's Institute of
Statistics, Geography, and Information (INEGI). Fewer Mexicans were having
more; growing numbers were having less; and it looked as if the country's
business tycoons were spending much more in political contributions to preserve
their influence with the ruling party than to help alleviate ever-growing
The "Mexico twelve," as the best-known billionaires became quickly known in
Mexico's political and business circles, had mostly benefited from Salinas's
radical measures to get Mexico out of its $96 billion foreign debt crisis.
Building on a timid economic opening begun by his predecessor Miguel de la
Madrid, Salinas in early I990 signed a much heralded debt pact with creditor
banks to ease Mexico's debt payments over a thirty-year period. But it soon
became clear to him that the agreement --which became known as the Brady plan,
for U.S. Secretary of the Treasury Nicholas Brady-- would only make a small
dent in the $10 billion Mexico was paying its foreign creditors annually.
Bolder moves were needed to stop the financial hemorrhage and lure capital
back to Mexico. It was a time of a world economic slowdown. International
investors, fascinated with the collapse of the Soviet bloc, were fantasizing
about fabulous business opportunities in Eastern Europe. Salinas had discovered
with shock during a visit to Davos, Switzerland, to address the World Economic
Forum, that his announcements of drastic free-market reforms were generating
little interest: His presentation had drawn a small audience compared to the
enthusiastic crowd that Russians and Poles had attracted. European investors
were too busy studying the new markets of the former Soviet bloc to spend time
looking into faraway Mexico.
"It's becoming clear that our future lies closer to home," Salinas told his
aides with resignation on the plane back. Mexico could only emerge from its
hopeless foreign debt quagmire if it took drastic free-market steps to draw the
attention of the world's financial community -- especially that of the United
Salinas would soon make his mark by announcing the privatization of Mexico's
eighteen commercial banks, which had been expropriated in I982 by President
Jose Lopez Portillo. He also announced the privatization of Telmex, Mexico's
giant telephone monopoly, and dozens of other state companies, while stating
Mexico's intentions to sign a free-trade treaty with the United States that
would among other things bind future Mexican governments to the new free-market
policies. Salinas's economic revolution had an immediate psychological and
economic impact: Slowly at first, faster later, massive capital inflows began
to return to the country. Mexico would take in nearly $20 billion over the next
three years through the sale of more than three hundred government companies to
the private sector.
Salinas's reversal of the nationalization of the banking industry a decade
earlier marked the end of a policy that had severed the bond between the PRI
and Mexico's business class. But Salinas did much more than mend a strained
relationship. He extended such an array of privileges to a small group of
businesspeople -many of them close to him-- that he elevated them into a power
clique married through a commonality of business and ideological principles to
the new leadership of the PRI.
In his bid to increase capital inflows, Salinas had put state banks on the
block at three times their book value and often more. Contrary to the criticism
of leftist politicians and popular belief in Mexico, the state enterprises were
not sold at bargain prices. But in exchange for high prices, Salinas offered
their buyers sweet regulatory deals and longterm promises of fabulous riches
through NAFTA, which would soon allow some of the new private owners to sell
their monopolies to multinational corporations at record profits. More
importantly, in the short run, he offered them a new climate of government-big
business cooperation that, in its best form, translated into new opportunities
for the private sector in an environment of growing deregulation, and, at its
worst, a series of behind-the-scenes government favors that would guarantee the
profitability of the new owners' investments.
Through a policy of "directed" deregulation or selective liberalization,
Salinas paved the way for the formation of more than a dozen monopolies that
would control industries such as copper mining and telecommunications. They
were meant to be strong enough to compete with U.S. firms in a free-trade
environment, and perhaps even be come the first Mexican multinationals to make
it big in the U.S market.
To the United States and the rest of the world, Salinas sold his privatization
program as the biggest turnaround in economic policy since the 1910-1917
Mexican Revolution. What he didn't say is that to get Mexican entrepreneurs to
buy government companies at several times their book value, he had to offer
them generous rewards under the table. Shortly after the government's Telmex
telephone monopoly was sold to Slim, the son of a Lebanese merchant who had
made a fortune in real estate and the cigarette business, Salinas authorized
spectacular tariff increases without demanding corresponding improvements in
the telephone service. In 1991, Telmex was allowed to increase telephone rates
by 247.4 percent, while wages that year were allowed to rise by 18 percent.
When the announcement of the telephone rate hikes triggered massive protests,
the company withdrew its announcement and agreed in a compromise to raise rates
by a mere 170 percent. "With wage in creases of 18 percent and telephone rate
increases of 170 percent, you don't need to be a financial genius to make it in
the business world," wrote political scientist Lorenzo Meyer at the time. "And
since the telephone service in Mexico is a monopoly, there is no free
competition to benefit the consumer."
What's more, the government assured several of the new business barons a
longterm monopoly over their respective industries and overt or disguised
government protection well into the NAFTA era. Under the trade agreement that
went into effect January I, I994, key Mexican industries --mainly those of the
Mexico Twelve-- were assured government protection for up to fifteen years.
Television baron Azcarraga's Televisa network, which had more than 90 percent
of Mexico's viewing audience and acted as a virtual mouthpiece for the PRI, was
protected from foreign competition for twelve years. Telecommunications czar
Slim was assured protection against foreign competitors for ten years under the
NAFTA deal. Banamex banking tycoon Roberto Hernandez, the Salinas friend who
had catered the PRI fund raiser at Ortiz Mena's home, was protected from
foreign competition for the next fifteen years.
Of course, the whole point of NAFTA was to prevent protectionism, but the
government-big business alliance in Mexico would take advantage of the years
before the full effects of the treaty kicked in. The selected tycoons were
given a head start in the new game of free trade -- not an unreasonable
principle in a deal between very unequal partners. But their considerable
privileges would allow them to position them selves so strongly in the Mexican
market that no foreign competitor was likely to make a dent in their businesses
before they were forced to compete openly with U.S. and Canadian firms at the
beginning of the next century. Free trade had created its own brand of
protectionism, and the Mexico Twelve were to be its main beneficiaries.
Mexico in the early nineties was similar to American capitalism in the late
1870s. Azcarraga, Slim, and Hernandez were not much different from railroad and
steel magnate Andrew Carnegie or oil trader John D. Rockefeller. Like the
American "Robber Barons" of their time, the Mexico Twelve were making a fortune
from their close partnership with the government. And to their immense relief,
Mexico was not contemplating anything like the 1890 Sherman Anti-Trust Act,
which had broken up U.S. monopolies through forced sell-offs.
"They discovered how convenient it was for them to use the government's power
in favor of their enterprises, and to thus accumulate fabulous fortunes," Meyer
said of the Mexican billionaires of the nineties. "Government leaders walk
around arm in arm with them, for the benefit of both of them, and for the
detriment of society."
The business tycoons who attended Don Antonio's banquet were far from strangers
to one another. They all belonged to a small, secretive organization called the
Council of Mexican Businessmen (Conselo Mexicano de Hombres de Negocios, CMHN).
It was a private group made up of Mexico's thirty-six wealthiest industrialists
that met with the Mexican president and his top ministers several times a year
to discuss the issues of the day.
The council had been created in 1962 in an effort to fight Mexican president
Adolfo Lopez Mateos's increasingly antibusiness policies and the socialist
rhetoric that shrouded them. After the president had stepped up distribution of
land to peasants and refused to join other Latin American governments in
breaking ties with Cuba's new revolutionary government, the council made its
political debut by placing an ad in the newspapers under the headline "Which
way are we going, Mr. president?" It turned out to be amazingly effective in
scaring the government into toning down its populist rhetoric, not the least to
stop a growing wave of capital flight that had been --perhaps unwittingly--
encouraged by the ad. Since then, the council had met with every Mexican
president and had had a growing behind-the-scenes influence over state
Under Salinas, it had reached the peak of its clout. It had advised the
president at every step of his tortuous struggle to push NAFTA down the throats
of skeptics on both sides of the U.S.-Mexico border, while assuring that its
members' business conglomerates would not be affected by the proposed
The council, which had never had a headquarters and met mostly at the home of
the daily Novedades publisher, Romulo O'Farril, was now moving into its
first formal headquarters--its political weight had become too obvious to
continue exercising it from the shadows. But the council's membership---a
virtual carbon copy of the list of guests at Don Antonio's fund-raiser---had
fresh memories of the l982 nationalization of Mexico's banking system and other
impetuous presidential measures against the business class. It was eager to
transform its variable influence into more permanent and structured political
Don Gilberto Borja, sixty-four, was the prototype of the Mexican business
tycoons whose companies had long lived from sweetheart contracts with the
government. A tall, silver haired, and aristocratic looking man, Borja presided
over Mexico's biggest construction and engineering firm, the 30,000-employee
ICA Group, which among hundreds of other public projects had built the $11
million opera house in San Cristobal de las Casas. The firm's board of
directors and advisers read like a who's who of Salinas's closest friends in
the business world: ICA's two main outside advisers were Telmex chief Carlos
Slim and banker Roberto Hernandez.
Under Salinas, ICA helped build, among other projects, the Highway of the Sun
between Mexico and Acapulco (a megaproject that according to some was the
costliest in the world per mile), another highway linking Mexico City to
Guadalajara, several legs of the Mexico City subway system, and a huge pipeline
system for the national oil monopoly, Pemex, serving the city of Guadalajara.
By I994, ICA officials said theirs was Latin America's largest construction
firm, with public works in Colombia, Turkey, the Philippines, China, and the
United States, where it was building, among other things, the City of Miami
Several months after he had helped organize the secret fund-raiser at Ortiz
Mena's house, Borja had adopted a more public political position as head of the
PRI's Celulas Empresariales, or "business committees." In his new capacity as
special adviser to candidate Ernesto Zedillo on business matters, Borja was
leading a nationwide drive to get owners of small and medium-sized businesses
to become active PRI contributors. Borja said he had come up with the idea of
forming the committees as a way to gather the businesspeople's concerns and
pass them on to the candidate. He had already chaired more than forty such
meetings, many of them in a tent he had specially built for that purpose in the
garden of his Mexico City home. In reality, it was a little-disguised fund
raising drive, whereby small groups of businesspeople were invited to offer
their advice before being asked to make a pledge for the candidate.
"I think I'm putting about thirty hours a week for Zedillo, and about fifty
hours for ICA," Borja told me with obvious pride during a May 17, I994,
campaign tour with Zedillo to Acapulco. "I travel about two days a week with
Zedillo and hold the meetings at home in "Mexico City on the other days. But I
try to travel with Zedillo and hold the meetings after I leave the office at
six P.M., when I can work it out."
"When you hold the meetings at your home, do you just talk about business
problems? You don't discuss politics?" I asked.
"The main purpose is to listen to their concerns," Borja responded. "But I
must say that at the end of each meeting, I make the concluding remarks. I have
to confess that I make the personal reflection that Mexico's political system
is being severely questioned, that we are in a time of growing political
competition, that the people demand more democracy, that we have the duty to
make a careful analysis on to whom we are going to give our vote. It's at this
point when I express my personal support for Zedillo: I tell them that because
of his capacity, because of his background, because of his moral standards,
Zedillo is the person who must carry on this country's economic program."
"But isn't your whole involvement as a PRI liaison with the business Community
a huge conflict of interest?" I asked as politely as I could. "If Zedillo wins
the election and ICA" wins the bids on major roads and highways during his
term, won't there be a generalized suspicion that his government would be
returning your favors?"
Borja looked at me with amazement, cracking a forced smile. He shook his head,
saying no. "Why?" he asked, as if he didn't understand what I was talking
about. "I don't see it at all that way," he went on. "I don't mix the
activities of ICA with those of Gilberto Borja. . . . I'm not doing it in my
capacity as ICA president, I'm doing it as Gilberto Borja."
More than angry, Borja looked baffled by the question. In the world of
Mexico's big business, where the government had long been the biggest client
and political connections counted more than anything else, it hadn't even
crossed his mind that his increasingly visible role in the ruling party could
be seen as a source of favoritism. The ICA Group president was wearing his new
title of official adviser to Zedillo on business matters as a feather in his
cap. In fact, his business committees were largely created as a new way to come
up with campaign funds for the PRI's presidential campaign following the
scandal over the Ortiz Mena banquet.
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