Carlos Slim Sees Colombia Rising as Commodity Choice
Mexican billionaire Carlos Slim stands for a photograph in New York. Photographer: Chris Goodney/Bloomberg
Feb. 10 (Bloomberg) -- Mexican billionaire Carlos Slim talks with Bloomberg's Betty Liu about his 2011 investment strategy in Latin America and his holdings in Saks Inc. and the New York Times Co. They spoke yesterday in New York. (Source: Bloomberg)
Carlos Slim, named the world’s richest man by Forbes Magazine, said he’s seeking to boost his investments in Colombia because of the country’s open policy on oil exploration, its mineral assets and growing middle class.
Slim aims to expand the drilling and oil-platform services he provides Mexico’s Petroleos Mexicanos through exploration opportunities in Colombia, he said yesterday in an interview at Bloomberg News headquarters in New York. Slim, whose holdings rose to $70 billion last year, has stakes in U.S. oil services companies Bronco Drilling Co. and Allis-Chalmers Energy Inc.
“The government is actively looking at the development of the oil industry and is promoting other investments,” he said. “We’re looking at what to do beyond the telecommunications business that we’ve been doing for 10 years in Colombia.”
Colombian foreign direct investment more than quadrupled in the past decade, to $7.2 billion in 2009 from $1.5 billion in 1999, after former President Alvaro Uribe repelled guerrilla groups that attacked oil pipelines and assassinated politicians.
OGX Petroleo & Gas Participacoes SA, the oil company controlled by Brazilian billionaire Eike Batista, said last year it may begin producing crude in Colombia in 2012. Batista is also boosting his investments in the Andean country, joining Anglo American Plc, BHP Billiton Ltd. Xstrata Plc and Drummond Co. in tapping South America’s largest coal reserves.
Surging Prices
Commodity prices are surging as emerging markets such as China and India require more resources to accommodate the needs and wishes of their growing middle classes for infrastructure and consumer goods, according to Slim. The depreciating value of the dollar is also driving those countries’ governments to build up their investments in commodities, he said.
“They don’t want to have Treasuries,” Slim said. “The dollar is weak and there’s no interest, and also with commodities they have reserves for internal consumption.”
Colombian President Juan Manuel Santos, who took office in August, is counting on rising commodity investments to fuel the Andean nation’s growth. Oil blocks auctioned last year will draw more than $1 billion over three years from companies including Royal Dutch Shell Plc, SK Energy Co. and Repsol YPF SA, according to the government.
Colombia attracted about $6.5 billion in foreign direct investment through the third quarter of 2010. Foreign direct investment in mining rose to $3 billion in 2009, the last year of annual figures available, from $1.8 billion in 2008, according to central bank figures.
Peso-Bond Slump
Still, Colombia’s fixed-rate peso bonds have slumped this year and stocks dropped amid concern the Central Bank may miss this year’s inflation target after floods choked off farmers’ supply routes, driving up food costs and sparking the biggest jump in monthly inflation since May 2008.
Colombia’s benchmark peso bonds due July 2020 touched an eight-month high of 8.2 percent on Feb. 8 and the IGBC stock index has dropped 5.6 percent this year.
Consumer prices rose 0.9 percent in January from December, pushing the annual inflation rate to 3.4 percent, the national statistics agency said in a Feb. 5 report. Banco de la Republica targets inflation between 2 percent and 4 percent this year.
As defense minister under Uribe from 2006 to 2009, Santos oversaw the rescue of 15 rebel-held hostages and an air strike into Ecuador that killed Raul Reyes, a top commander of the guerrilla group known as the FARC. Military offenses have reduced attacks on pipelines, roadways and bridges to 76 in 2009 from more than 800 in 2002, according to government figures.
Security Policies
Uribe’s security policies helped almost cut in half the number of murders and slash by 93 percent kidnappings by 2009, spurring economic gains. The Central Bank expects the economy to expand around 4.5 percent this year after growing en estimated 3.7 percent to 4.1 percent in 2010.
The son of a Lebanese immigrant who ran a dry-goods store in downtown Mexico City, Slim took advantage of periods of economic crisis in his native Mexico to buy real estate and assets such as a bottling company and a cigarette maker to amass his fortune. He acquired Telmex, as Mexico’s biggest land-line phone company is known, in a 1990 privatization sale.
America Movil SAB, the mobile-phone carrier controlled by Slim, had 29.4 million mobile-phone subscribers in its unit covering Colombia and Panama at the end of last year, up 3.8 percent from a year earlier. The unit’s sales jumped 10.6 percent to 1.9 trillion Colombian pesos ($1.01 billion) in the fourth quarter as clients used their phones more for voice and Internet access.
Wireless Company
The wireless company, Latin America’s largest, was a 2001 spinoff from Telefonos de Mexico SAB and has become Slim’s biggest investment success. His holdings of America Movil were worth about $49 billion at the end of last year.
The dollar has dropped 7.1 percent in the past year against the Mexican peso. Gold has fallen 3.9 percent this year as an equity rally, spurred by the global economic recovery, eroded demand for an alternative investment.
Slim’s publicly traded assets were up 37 percent in 2010, with the biggest gain coming from Grupo Carso SAB, a holding company that was preparing a spinoff of its mining unit. Minera Frisco SAB, which became a separate company last month, is planning new mines in 2011 that will produce 437,577 ounces of gold a year, more than double last year’s output.
New York Times
His worst-performing stock last year, publisher New York Times Co., fell 21 percent. Slim’s publicly disclosed shares in U.S. markets represented less than $500 million of his total holdings, with the rest in Mexican companies.
He acquired shares of two of those companies, Bronco Drilling and Allis-Chalmers, through his own Carso Infraestructura y Construccion SAB, the contractor to Mexico’s Pemex.
“We believe in all Latin America and that’s why we’re investing,” Slim said. “The macroeconomic variables are sound, healthy and many of the countries have raw materials that are having good prices.”
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