How AMLO & Sheinbaum Tamed Mexico's Elon Musk
An earlier version of this article was published on November 26th at Compact.
Last month, Mexico’s Supreme Court ruled against billionaire magnate Ricardo Salinas Pliego’s claims against almost USD$3 billion in unpaid taxes. The ruling represents yet another victory for leftist President Claudia Sheinbaum and her predecessor AMLO’s crackdown against corporate tax evasion. Having actively promoted the so-called ‘Gen-Z’ protests against Sheinbaum, Salinas has been described as the ‘Mexican Elon Musk’ for his anti-government, libertarian views. His 2.1 million followers on the X social media platform sing to the tune of Bitcoin, Milton Friedman and Argentina’s anarchocapitalist President Javier Milei.
The day of the protests, Salinas–who is reportedly planning a presidential run–said the following on X: “What Mexico needs is a tiny government without so many regulations nor absurd taxes to maintain the lives of government parasites”. Whether this message resonates with voters remains to be seen. Like AMLO, Sheinbaum has received high marks from the Mexican people. Morena’s long overdue check on billionaires like Salinas speaks to the party’s enduring popularity as well as a budding contrast in the influence of oligarchs north and south of the border.
A scion of the Mexican elite, Salinas inherited the retail and financial conglomerate Grupo Elektra from his father in 1987. At the time, Mexico was undergoing a campaign of mass privatizations by the government of Carlos Salinas de Gortari of the one-party PRI regime; no relation to Salinas Pliego. As in so many other post-Cold War privatizations, the Mexican magnate resorted to cronyism, leveraging a USD$29.8 million loan from the president’s brother for the 1993 purchase of state-owned broadcaster, Imevisión. The acquisition later became the country’s second largest channel, TV Azteca, transforming Salinas into one of Mexico’s first billionaires.
For all of his talk of the ‘invisible hand’ of the market, Mexico’s Elon Musk–much like the real Elon–owes most of his success to government patronage. While the Tesla billionaire deserves equal scorn for his self-serving and ketamine-induced delusions, he remains one of the few entrepreneurs in the Americas whose fortune derives from innovation in manufacturing as opposed to cronyism and financial engineering. Naturally. Salinas cultivated close ties with consecutive administrations of the centrist PRI and conservative PAN parties, benefitting handsomely from state-sponsored tax evasion.
Before Morena, the Mexican government allowed the country’s largest firms, including foreign multinationals, to accumulate gargantuan sums in unpaid taxes. On paper, companies like Walmart owed millions to Mexico’s internal revenue service (SAT) but were allowed to forgo payments–as well as late fees–via a combination of legal injunctions and weak enforcement over a course of decades. Accordingly, Grupo Elektra proved to be one of the worst offenders among Mexican firms with unpaid taxes going as far back as 2008. In Salinas’ telling, these were the days when Mexico was a great country before AMLO’s election in 2018.
That year, Lopez Obrador won the presidency in a landslide promising to end the privileges of the so-called ‘mafia of power’ that dominated Mexico. AMLO subsequently took an axe to real and perceived waste across a host of institutions including academia, government agencies, public sector salaries and the NGO-industrial complex under the mantra of ‘Republican Austerity’. By 2019, businesses were terrified that they were next on the chopping block after congress codified tax evasion as a national security threat comparable with drug trafficking. One by one, the owners of Mexico’s largest and most powerful companies fell in line–all save for the flamboyant Salinas.
The irony is that the self-described minarchist saw the writing on the wall well before Lopez Obrador assumed the presidency. Having led all polls and nearly won the presidency in 2006 amid irregularities, Salinas saw potential in the cantankerous populist. That year, the Mexican magnate granted AMLO and his coalition a daily show on TV Azteca at a notable discount and in stark contrast to his opponents. Then during the 2018 election, he provided favorable coverage to Morena on TV Azteca. Of course–like so many other billionaires–Salinas’ patronage of figures from across the political spectrum served as an insurance policy in case of their election.
Indeed, a triumvirate of Mexico’s three richest men composed of Carlos Slim, German Larrea and Salinas served on Obrador’s council of business advisors alongside other billionaires and extracted notable concessions from the ostensibly anti-business president. Slim and Larrea received public contracts for the construction of infrastructure projects; they also assisted the government’s partial renationalization of Mexico’s energy sector. In turn, Salinas’ Banco Azteca became a key pillar of Morena’s social programs in poor neighborhoods. Both AMLO and Sheinbaum, moreover, have refused to raise income taxes and shirked promises to reduce Mexico’s worst-in-the-hemisphere 48-hour work week; a gradual reduction to 40 hours by 2030 is finally being debated in Congress as of this month.
In exchange, the country’s oligarchy tolerated historic hikes to the minimum wage, the codification of labor rights and agreed to finally pay longstanding taxes–a vital revenue priority precisely because of the administrations’ commitment not to raise income taxes. While Slim and Larrea quickly settled their debts with the state, including paying for retroactive late fees, Salinas refused to pay more than what he ostensibly originally owed.
What followed was a protracted legal battle over the magnate’s considerable debts to the state though for years he and AMLO maintained they were open to an agreement. Over time, the two men fell out. The government sidelined Salinas’ Banco Azteca in favor of the state-owned–and military built–Bancos de Bienestar. The libertarian Salinas also refused to comply with Mexico’s comparatively lax pandemic restrictions and attacked the purported marxist indoctrination of Mexican education. In June, the billionaire slammed the former president: “ I thought since I was Obrador’s friend, we could come to a reasonable agreement…And let’s be honest, all taxation is theft”.
