Mexico's wealth gap in spotlight as Slim and miners get richer

MEXICO CITY Tue Mar 5, 2013 5:32am IST

Mexican businessman Carlos Slim listens during a news conference after the inauguration of a new research facility at the International Maize and Wheat Improvement Center, or CIMMYT, in Texcoco outside Mexico City February 13, 2013. REUTERS/Henry Romero

Mexican businessman Carlos Slim listens during a news conference after the inauguration of a new research facility at the International Maize and Wheat Improvement Center, or CIMMYT, in Texcoco outside Mexico City February 13, 2013.

Credit: Reuters/Henry Romero

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MEXICO CITY (Reuters) - Two Mexican mining magnates have moved up Forbes' annual list of the world's richest, headed once again by compatriot Carlos Slim, underscoring the challenge the new government faces to narrow the wealth gap and pull millions out of poverty.

Slim's fortune - from an empire that stretches from telecoms to retail, to mining and banking - rose nearly 6 percent to $73 billion in 2012. The tycoon topped the list for the fourth year in a row, ahead of Microsoft founder Bill Gates.

The wealth of Alberto Bailleres, the second-placed Mexican on the 2013 list at No. 32 and chairman of mining group Industrias Penoles (PENOLES.MX), grew 10.3 percent to $18.2 billion.

And fellow miner and low-profile head of Grupo Mexico (GMEXICOB.MX) German Larrea, 59, who came in at No. 40, added 17.6 percent to his fortune to reach $16.7 billion.

Bailleres was No. 38 on Forbes' list last year, and Larrea No. 48.

Around half of Mexico's 115 million people live in poverty. More than 12 million Mexicans joined the ranks of the poor between 2006-2010, according to government data. A study published in 2012 by the International Labor Organization put the average Mexican salary at $609 a month.

Inspired by the anti-poverty successes of former Brazilian President Luiz Inacio Lula da Silva, new President Enrique Pena Nieto campaigned on a pledge to lift 15 million Mexicans out of poverty.

Only Chile is more unequal than Mexico, according to data from the 34-country Organization for Economic Co-operation and Development.

"This is a very clear indicator of the main problems in Mexico," said columnist and historian Lorenzo Meyer. "It's not logical that a country with half its population living in poverty should also be home to the world's richest man."

Mexico's big loser on the Forbes list this year was Ricardo Salinas Pliego, the head of retailer Grupo Elektra (ELEKTRA.MX), who in 2011 enjoyed the largest increase in wealth, when he added $9.2 billion to his net worth.

Salinas, 57, dropped to No. 111 on the list from No. 37 a year earlier, and now has $9.9 billion to his name, Forbes said. Elektra's share price has fallen 54 percent since March last year as a derivatives instrument known as an equity swap worked against the company, battering its stock.

TAXES AND ROYALTIES?

The miners' success comes as the Mexican government and its main rivals have agreed in principle to discuss imposing additional levies on mining companies, which are low compared to those in regional competitors like Peru and Chile.

While Mexico's oil sector is in state hands and prohibits foreign ownership of energy reserves, the mining sector is wide open. Mexico does not charge mining companies royalties, only taxing them on profits.

"It could be a combination of land taxes and royalties, or just royalties," Economy Minister Idelfonso Guajardo said recently. "I think the law needs to be an instrument to give clear guidelines and not send mixed messages to investors hoping to invest in this sector."

Any new mining tax could help lighten the burden on state oil monopoly Pemex, which funds one third of the federal budget, analysts say.

While still at the top of the list, 73-year-old Slim has taken a hit on recent investments in Europe, like a nearly 30-percent stake in Dutch telecom KPN (KPN.AS) and a similar stock purchase in Telekom Austria (TELA.VI).

KPN has lost more than half its value since Slim moved in and Telekom Austria has also floundered.

Meanwhile, after weaker-than-expected results, shares in telecom giant America Movil have fallen more than 10 percent since the start of 2013 on uncertainty over how planned overhauls of the telecoms industry and competition laws will affect Slim's empire.

"America Movil generates a disgusting amount of cash," said Gerardo Roman, head of stock trading at Mexico City's Actinver brokerage. "Nowadays, who invests in Europe? But in six or seven years, we're going to say, 'What an investment, he nailed it.'"

One notable omission from the list was Mexican drug kingpin Joaquin "El Chapo" Guzman, whom Forbes had included for the last four years.

"The increased pressure put on the drug trade by the Mexican drug war suggest that he has to spend more of his money on security and bribes to protect his family, meaning his annual take of the world's massive cocaine trade ... is getting thinner and thinner," Forbes said on its Web site.

Forbes included 12 other Mexicans, from No. 179 to No. 1,107, on the list.

(Additional reporting by Veronica Gomez and Armando Tovar.; Editing by Simon Gardner and Xavier Briand)

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