Milken Speaks of Debtor Nations, Mexico’s Future on Tijuana Tour

Indicted financier Michael Milken extolled the virtues of international understanding, education, hard work and bilingualism in talks before Tijuana business groups Thursday and Friday.

Milken’s visit and speeches were seen by some as part of an effort to rehabilitate his image in the aftermath of his March indictment on 98 counts of racketeering, mail fraud, wire fraud, securities fraud and making false statements. Milken has pleaded not guilty to the charges.

In an interview, Milken said he was making the trip to scout unspecified investment opportunities and to get a firsthand look at Tijuana’s booming maquiladoras, the plants where increasing numbers of foreign companies, mostly American, are sending product components to be assembled with low-cost Mexican labor.

During his Friday-morning visit to the plants, a tour that included a stop at the giant Sanyo facility in Tijuana, Milken was particularly interested in Japanese management style and methods, said consultant Tony Ramirez, a vice president of Chula Vista-based Made in Mexico who acted as one of Milken’s guides.

“He seemed interested to hear that the Japanese typically come into Tijuana with both feet, buying property, whereas Americans are more cautious and simply lease buildings here,” Ramirez said. One member of Milken’s entourage said Milken had discussed the possibility of setting up a system whereby bankrupt U. S. firms transfer operations to Mexico to take advantage of lower labor costs.

After the plant tour, Milken gave the keynote speech at a Mexican American Foundation luncheon at the Fiesta Americana Hotel in Tijuana before an audience of 250. On Thursday evening, he spoke to a smaller group, including several maquiladora operators, at the Jockey Club at the Agua Caliente race track.

Milken, one of the nation’s wealthiest men with a 1988 income reportedly in excess of $500 million, has been on indefinite leave from his job at Drexel Burnham Lambert in Beverly Hills since his indictment.

Since reports began circulating more than a year ago that he was being investigated for violations of securities laws, Milken has sought a higher profile as a philanthropist and as a financier concerned with macroeconomic problems. He has given millions of dollars to charities and foundations, expressing a particular interest in education.

Milken acted as something of a tour guide on his two-day trip to Tijuana, arriving with about 40 U. S. businessmen in tow. Most of the businessmen were past and present clients at Drexel Burnham Lambert, where Milken single-handedly created the market for junk bonds, the high-risk, high-interest-rate bonds that have been used to finance many of the decade’s corporate takeovers.

Milken’s fans point out that junk bonds have also generated capital for many companies to whom other financing avenues were closed.

In his Friday luncheon talk, Milken said Latin debtor nations should not be made to devote all their cash resources to pay off the huge debts piled up over the last decade. Rather, the creditors should somehow allow the nations the means to “invest in economic growth,” he said.

“When a U. S. company has financial problems, you don’t allow the company to rebuild itself by taking all its liquidity as loan payments,” Milken said. He asserted that Mexico and other Latin debtor nations are in their current fix because the loans were made not to private enterprise in Latin America but to the “public sector” or governments.

To illustrate the strength of Latino culture in the United States, Milken cited the fact that Spanish-language newspapers have grown to more than 150 over a decade, when many predicted such publications would become extinct. He also noted the proliferation of Mexican restaurants on the East Coast during the last 20 years.

In his Thursday night talk, Milken compared the state of Mexico’s economy with that of Japan 30 years ago, and said Mexico is ripe for a similar economic surge.

He also said current real estate values in Mexico reminded him of the depressed New York City market in the early 1970s, when the city was in the throes of severe fiscal problems. He predicted that Mexican real estate will appreciate rapidly in coming years.