That’s close to one-fifth of Slim’s total fortune at the beginning of 2015, making him this year’s biggest loser, both in absolute and relative terms, on Bloomberg’s Billionaire index.
Most of Slim’s losses came on the back of continued financial hemorrhaging at his gold mining company Minera Frisco, whose stock has tumbled over 55% this year, as well as the recent drubbing in global stock markets.
Mexico’s second and third richest individuals, Germán Larrea Mota-Velasco and Alberto Baillères González, both of whom made their fortunes in mining, have fared little better this year, having also seen the dollar value of their wealth shrink by roughly 20%. But that is nothing compared to the wealth destruction, in relative terms, suffered by Ricardo Salinas Pliego, Mexico’s fourth richest man, whose personal fortune is now worth roughly half of the $8 billion it was worth at the beginning of the year.
Family Business Troubles
Salinas Pliego is the elder son of Hugo Salinas Price, the founder of Mexico’s Elektra retail chain who is probably best known internationally for his recent efforts to bring physical silver currency back into use in Mexico, the world’s largest silver producer.
When Salinas Pliego took over the family firm, in 1987, Elektra had just 59 sales points around the country. Now it has 4,000 in Mexico and another 637 dotted across Guatemala, Honduras, Peru and Panama.
Despite all the growth, things are not going well. While Salinas the elder seeks to bolster Mexico’s economy by trying to convince the government to re-adopt a sound money policy, the family’s fortune, now under the supervision of Salinas the younger, is bleeding funds at an alarming rate — and not just as a result of unfavorable external conditions.
Long before the Mexican peso began losing weight and global stock markets began diving, the Salinas business empire was already in trouble, reports Economía Hoy. The family’s two main business holdings, the television broadcaster TV Azteca and the appliance retailer and banking company Grupo Electra, have so far lost close to $6 billion this year.
For TV Azteca, the main problem is its anemic advertising sales. According to Homero Ruiz, an analyst with Signum Research, sales are flagging due to two main reasons: a weak retail environment and the decision by many companies to spend more on digital advertising and less on traditional channels such as television. This year alone TV Azteca, which Salinas bought in 1993 to compete with Mexico’s quasi-broadcasting monopoly Grupo Televisa SAB, has lost more than half its value.
“There’s a clear lack of confidence among investors in the company,” said Ruiz. “I don’t think we’ve seen the final leg of Azteca’s stock’s collapse: the margins just keep narrowing. It’s a critical situation for a media company.”
Meanwhile the shares of Grupo Elektra, which targets less prosperous consumers who borrow money from the group’s banking arm, Banco Azteca, in order to buy items like TVs and refrigerators at the group’s appliances retailer Elektra, reached eight year-lows last week. A form of vendor-financed subprime consumer purchases comes to mind. (Elektra stores also sell very attractive, competitively priced one-ounce Silver Libertad coins).
Even with increased retail sales, the holding group’s banking arm, which accounts for two-thirds of its operations, continues to drag down the share price, said Francisco Guzmán, an analyst with Interacciones Casa de Bolsa SA.
Wealth Destruction, at the Top of the Pyramid
Taken together, Mexico’s four richest individuals have lost a staggering $21 billion so far this year – the equivalent of 20% of their total net worth and around 2% of Mexico’s GDP.
Partly to blame for this wealth destruction is the Mexican peso. In the last eight months, the peso has shed 15% of its value against the US dollar. This is playing havoc with company margins and profits, especially for those with dollar-denominated debt but peso-denominated operating income [read: Corporate Dollar Debt Explodes in Mexico as Peso Dives].
But it’s not just billionaires from Mexico who are struggling. On Monday, the last day of the latest stock market rout, $124 billion was wiped off the collective fortunes of the world’s 400 richest people. According to data compiled by the Bloomberg Billionaires Index, so far this year the world’s richest man Bill Gates has lost roughly $6.5 billion, while third-placed Warren Buffet’s fortune is down $9.5 billion.
Although global markets have made a recovery in the last few days, the recent rout has served as a stark reminder of just how exposed the world’s largest personal fortunes are to the everyday vagaries of the international equity markets.
Thanks to years of unprecedented central bank intervention in financial markets, the paper value of the financial assets held by the world’s 0.0000(…)1% has been reinflated to the point where it bears not the slightest relation to economic reality or fundamentals.
But reality cannot be forestalled indefinitely. Indeed, the recent spikes in market volatility suggest that it could be in the process of making a very big comeback. If it does, those who have benefited the most from the central banks’ financial engineering, the 0.00000(…)1%, could see a sizable chunk of their wealth transition into the realm of the illusory.
Hence the rising panic of those at the very top of the global wealth pyramid. Just last week, two senior representatives of America’s financial elite, Laurence Summers and Ray Dalio, begged the Fed for yet another hit of Quantitative Easing — whatever it takes to postpone the day of reckoning.
Source
________
A Hot September For Catalonia
By Don Quijones: September will be a make-or-break month for Spain’s richest region, Catalonia. In 12 days’ time the streets of its capital, Barcelona (from where I’m writing), will once again broil with uncountable crowds of local people solemnly marking the Diada, a national day for a nation that doesn’t officially exist. Two weeks later, on September 27, the region will hold its most important elections since Spain’s late dictator Francisco Franco passed away 40 years ago. If the pro-independence parties win a majority of seats (68 out of 135) in Catalonia’s parliament, they will unilaterally declare independence from Spain.
That’s the plan at least, although the chances are that Madrid will have something to say in the matter. And that something is unlikely to be pleasant.
Rhyming History
Once again, history is seemingly rhyming south of the Pyrenees, as divisions rise and gulfs widen – not just between pro-independence Catalans and nationalist Spaniards, but between Catalans themselves.
As in Scotland, the separatists and unionists are closely matched in terms of numbers, with roughly two million people on either side. As one side clings to the dream of independence, the other frets about splitting from the rest of Spain, not to mention the potential for economic chaos, social division, and expulsion from the European Union.
Unlike Scotland, the independence process in Catalonia has been banned from taking place. There can be no official referendum or plebiscite, both of which are, in the oft-repeated words of Spain’s incumbent Prime Minister Mariano Rajoy, “anti-constitutional.”
One crucial result is that there is no escape valve for the pressures that are slowly building. Nor is there any hope of a negotiated settlement. Instead there is an escalating war of words and gestures, and a generalized climate of uncertainty, resentment and fear.
The economic consequences are already being felt. Thousands of Catalan companies have upped sticks and relocated to Madrid or other Spanish cities. What’s more, there are signs that the growing tensions between Madrid and Catalonia, combined with rising political uncertainty, are spoiling investor appetite. In June alone, overseas investors withdrew over €21bn from Spanish markets, compared to the €1.3bn they injected into the country during the same month of 2014.
This is just one of the visible consequences of worsening regional tensions in Spain. Yet although the slow-brewing conflict of words and gestures has the potential to unleash a maelstrom of unintended consequences, both within Spain and far beyond its borders, public figures on both sides of the divide continue to lock horns and ratchet up the pressure.
Choosing the Wrong Words
On Saturday Rajoy exhibited his usual tact and subtlety by likening the disunity caused by Catalonian nationalism – up to this point a wholly peaceful, democratic movement – to a virus. He also reiterated for the umpteenth time that whatever happens in the coming elections, Catalonia will always form part of Spain.
On the very same day, the Guardia Civil conducted searches of the headquarters and other offices belonging to Convergència Democrática de Catalunya (CDC), Spain’s largest pro-independence party, as part of an investigation into corruption charges against some of the party’s senior members. While there can be no doubting the seriousness of the allegations – the CDC is accused of running a decades-long extortion scheme – one can’t help wonder about the Guardia Civil‘s choice of timing, given that it coincided with the official launch of the pro-independence coalition’s electoral campaign.
A day later it was the turn of Spain’s former socialist Prime Minister Felipe Gonzalez to twist the knife. In an open letter published in El País, he implored the Catalan people not to follow the CDC leader Artur Mas down a “dead end” (camino muerte).
Although some of his arguments may have been on the money, in particular his assertion that Catalan politicians have purposefully played down the risk of a newly independent Catalonia being evicted from the EU, González could have chosen his wording more carefully. Worst of all was a short passage in which he drew comparisons between the threat posed by Catalan nationalism and the German and Italian “misadventures” of the 1930s — hardly a line of reasoning that’s likely to convince undecided Catalans to stay put in Spain.
No Jaw-Jaw
The response from Spain’s north-eastern province was immediate. The second-in-command of the pro-independence coalition, Carme Forcadell, accused González of upholding the same flawed theses as Spanish conservatives. “It seems to me that the arguments of the Spanish right are exactly the same as those of the Spanish left,” she said. “What’s more, González is in no position to talk about legality” – an oblique reference, one assumes, to the González’s government’s use of illegal death squads to fight the Basque Militant Separatist Group ETA in the 1980s.
Joan Tarda, a deputy of the Republican Left of Catalonia, offered a somewhat more vivid riposte:
González vomits up bile against the (independence) process. If he could, he would no doubt launch a dirty war, but he wouldn’t get away with it because everything we’re doing is both civic and democratic.
How long it stays that way, only time will tell. As the Financial Times warns, without negotiations between the two parties there can be no resolution to the current standoff. But given the proximity of the general elections, which are likely to take place some time in December, and the outright refusal of Rajoy’s People’s Party to negotiate with Catalan separatists, the chances of there being any jaw-jaw in the coming months are wafer slim.Source
No comments:
Post a Comment