As Mexican billionaire Carlos Slim Helu continues his buying spree of large stakes in distressed U.S. companies, commentators have started to question the possible impact of his expanded influence on U.S. business and politics. 

In the last year, Slim, through his family members and affiliated companies Banco Inbursa and Inmobiliaria Carso, has acquired:

- $250 million of six-year notes of The New York Times (NYSE: NYT) bearing interest at 14% per annum coupled with warrants convertible into common shares (this is in addition to the $128 million of NYT common stock Slim bought in September 2008 and representing 6.4% of NYT common stock; after the exercise of the warrants Slim’s NYT stake would rise to 17%);

- A 18% stake in luxury goods retailer Saks, Inc. (NYSE: SKS), which prompted the company’s board of directors to enact anti-takeover measures (rumors have suggested Slim is interested in the Saks’ real estate holdings); and

- A $150 million stake in Citigroup common stock (NYSE: C), which aroused speculation that Slim would seek to take over Citigroup’s Mexican subsidiary Banamex; Slim promptly denied interest in Banamex.

Andres Martinez, a Mexican native and journalist, suggested that Slim’s investment could pose serious conflict of interest problems for the NYT that could threaten its journalistic integrity. 

At this juncture, Mr. Martinez’s view seems to be a stretch.  Even after Slim exercises his warrants to acquire 17% of NYT common stock, Slim will have no representation on the NYT board, and no special voting rights.  The Ochs-Sulzberger family owns 19% of the company, which it controls through a special class of supervoting shares. 

The view of Armand Peschard-Sverdrup, a senior associate of the Center for Strategic and International Studies, is more on point: ”by having a stake in the New York Times, [Slim is] basically projecting himself as a powerbroker in this country, regardless of how his investment does.”  His investment in NYT, which yields a 14% annual return, appears that it will do very well.

Mexico will postpone construction of its planned Punta Colonet port project on the Pacific Coast, and may scrap the project entirely, for lack of financing, according to a Bloomberg report.

The project was the biggest portion of President Felipe Calderon’s pledge to spend 570 billion pesos (US$41.2 billion) in public and private money on infrastructure projects in Mexico through 2012, the report said.

Mexico Law Blog previously reported on the project, the most detailed of which are available here and here.

The Mexico Institute and the Woodrow Wilson International Center for Scholars at Princeton have launched a new website/blog called The Mexico Portal, which according to the site, “provides the most comprehensive and timely news, analysis and studies on Mexico.  It covers a wide range of critical issues, including migration, security, the economy, development, energy, and elections.”

“We hope that The Mexico Portal helps the U.S. public follow events that occur in Mexico and in the Mexican community in the United States, as well as permit access to new studies, articles and reports that explore the significance of those issues,” said Andrew Selee, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, in a press release cited in a Sentido Comun report.

The Mexico Portal is a welcome addition to the growing number of Mexican-related news and information sites.

U.S. journalist resident in Mexico Jeremy Schwartz provides a refreshingly clear and insightful view of the reality of traveling in Mexico in a recent post on his Uncovering Mexico Blog. 

He writes: “While there are certainly some failed cities – I would never tell loved ones to go anywhere near Ciudad Juarez or Tijuana or Culiacan – most of the country is still stable and peaceful.  As violent as the drug war has become, its victims are still overwhelmingly connected to the cartels.  Few innocents are caught in the cross-fire.  I wouldn’t necessarily recommend a sightseeing trip to certain border towns or through the remote mountains of the Sierra Madre, but tourists should feel comfortable booking a trip to places like Puerto Vallarta or Oaxaca or Veracruz.

…

Viewing Mexico as an ungovernable chaos is to make a caricature of this vast, complex country.  As I told my friends and family, it can prevent you from enjoying the magic that still courses through Mexico’s veins.”

Amen.

In Mexico, and in most of Latin America, calling a person you meet for the first time by his or her formal title, such as a Doctor (whether MD or PH.D) “Doctor“, or an Engineer “Ingeniero“, or an Accountant “Contador“, etc., has far greater more social importance than in the United States. 

The title is perhaps an indication of social stratification, separating those who have obtained professional training from those who have not, but whatever the reason for its existence, anyone who does business in Mexico should be aware of the importance of the use of personal titles. 

Jeremy Schwartz provides a nice summary of this social practice in his post here at the Uncovering Mexico Blog.

Reuters reports that Starbucks Coffee International (NYSE: SBUX) has elected not to exercise its option to increase its ownership interest in Starbucks Coffee International, a joint venture that was formed in 2002 between Starbucks Coffee International, Inc., a Washington corporation, and SC de Mexico, S.A. de C.V., an affiliate of Alsea, S.A.B. (MX: ALSEA), one of Latin America’s leading fast-food franchise operators and foodservice distribution companies.

The joint venture agreement gives Starbucks the option to increase its participation in SC de Mexico from 18% to 50% until 2012, according the the Reuters report.  SC de Mexico is operated by Alsea.

Alsea has opened more than 200 Starbucks coffee shops since the brand first entered Mexico just over five years ago and now stores are opening throughout the country at one of the fastest rates in the world amid sluggish coffee sales in the United States, the report said.

In September 2008, the Director General of SC de Mexico announced that Starbucks would increase its stake in the joint venture in 2009.  The change of course is perhaps a signal that the deepening global financial crisis has forced the company to reign in spending.

I recently assisted my colleagues John Rogers and Mary Rose Brusewitz in the preparation of a paper entitled “The Financial Crisis and Implications for U.S.-Mexico Bankruptcies and Restructurings“, which was published in Latin American Law & Business Report. 

On January 15, 2009, John and Mary Rose will join a panel discussion at the U.S.-Mexico Chamber of Commerce in New York, in which they will discuss aspects of the paper and cross-border restructurings amid the current financial crisis.  The panel discussion is part of an event hosted by the U.S.-Mexico Chamber called Corporate Restructuring and Distressed Markets in Mexico.

Kansas City Southern (NYSE: KSU) will continue to invest in Mexico through its Mexican subsidiary, Kansas City Southern de Mexico, S.A. de C.V. (KCSM), despite the global economic recession, according to a report at mexicobiznews.com. 

KCSM, which expects to be moderately affected by the financial crisis, anticpates that the new railway facilities at the Lazaro Cardenas Terminal, a deepwater port located in the State of Michoacan, will increase rail cargo volumes, the report said. 

In June 2006, KCS announced that it would provide daily service from Larazo Cardenas, San Luis Potosi, and Monterrey, Mexico to the southeastern U.S. markets via Jackson, Miss., with connecting service to Atlanta, Ga.  KCS acquired a controlling stake in Transportacion Ferroviaria Mexicana (TFM) in April 2005, enabling it, TFM, and The Texas Mexican Railway Company to create a single 1,300 mile rail system under common ownership connecting the midwestern United States, central Mexico, and Mexico’s Pacific seaports, according to the Freightdawg.com blog.

The Lazaro Cardenas Terminal is managed by Hutchison Port Holdings.

On January 15, 2009, the U.S.-Mexico Chamber of Commerce in New York will host an event entitled Corporate Restructuring and Distressed Markets in Mexico.

The event includes a keynote speech by Luis Manuel Mejan, Director General of the Mexican Federal Institute of Commercial Insolvency Specialists (IFECOM), and a panel discussion led by my Strasburger & Price colleagues John Rogers and Mary Rose Brusewitz, and Steven Kargman, President of Kargman Associates, a restructuring advisory firm.

More information is available here.

Mexico Law Blog will not publish any new posts from December 14-21 because I (John Dorsey) will be in Sao Paulo and Rio de Janeiro, Brazil on business.  Posting will resume the following week.

Feel free to contact me if you are in Brazil and would like to have coffee or a caipirinha.