Economic Legend to Advise Mexico on Free Trade Talks : Commerce: Juan Gallardo made it big during hard times. He wants to ensure that a compact with the United States helps--instead of hinders--business people.

Juan Gallardo could teach Howard Ruff a few lessons about prospering in hard times.

Even the perennial pessimist of U.S. economic forecasting could not imagine a worse scenario than the one that has confronted Mexican entrepreneurs such as Gallardo the past eight years.

Besides a severe economic slump, they have endured a policy switch from protectionism and government paternalism to open markets and privatization--and the loss of subsidies that accompanied the old system.

At 42, Gallardo has survived the 1982 expropriation that eliminated his banking job, participated in one of the most controversial sales in the Mexican government’s privatization drive and bought into troubled companies during the country’s economic crisis.

The tall, graying entrepreneur came out ahead.

In the process, he earned such respect from Mexico’s other business leaders that they named him their representative in the pending free-trade talks between the United States and Mexico. Preliminary discussions about a trade pact are expected to top the agenda at next week’s meeting in Monterrey between the U.S. and Mexican presidents.

Gallardo made it clear during a recent interview that he believes that negotiation of an agreement to remove trade barriers between the two countries is a government-to-government matter.

However, he was equally adamant that the negotiators need advice from private enterprise. “A free-trade agreement is a tool for business to do business,” he said. “That’s its whole purpose.”

His presence on the negotiating team may reassure Mexican private enterprise that the two governments will keep that in mind as they set about eliminating tariffs and other obstacles to trade.

Mexico’s importers and exporters chose Gallardo for the role because “he is the ideal person,” said Juan Morales Doria, president of the Mexican Business Committee for International Affairs and vice president of Grupo Alfa, the country’s largest conglomerate.

“Juan Gallardo is a well-known entrepreneur and has good relations with his counterparts in the United States,” explained Morales Doria. “He speaks excellent English and has contact with people in the top levels of the Mexican government.”

Gallardo is part of a new generation of well-educated, cosmopolitan Mexican entrepreneurs who are building careers in a rapidly changing economy. They are the private-sector counterparts of the government’s young technocrats.

The son of a diplomat, he studied at French schools in Mexico, Washington, and Belgium. After graduating from one of Mexico’s most prestigious law schools, he went to work for a large mining company, Grupo Industrial Minera Mexico.

In the early 1970s, he moved to the international division of a major bank, Comermex. About the same time, he joined some friends in forming an investor group that buys controlling interests in promising companies, particularly turnaround possibilities.

When the government nationalized banks in 1982, Gallardo returned to Industrial Minera, this time as president. After his growing investing activities prompted him to assume a lesser role of board member, the mining company won two auctions that returned major government-owned copper mines to private hands. The wins gave Industrial Minera a near-monopoly on Mexican copper.

The investor group’s portfolio also kept growing.

“There was no planning process,” Gallardo said. “We took the opportunities as they arose. In this state of flux that Mexico has gone through, obviously these opportunities have been there--and as a group of investors, we have become involved. That’s why it’s such a varied combination.”

The combination has given Gallardo the opportunity to participate directly in business deals at the heart of Mexico’s economic restructuring.

He sits on the board of the company supplying digital equipment to modernize the country’s antiquated telephone system. Another of the companies is a capital goods manufacturer, part of the sector hardest hit by the government’s decision to slash tariffs and open the economy to imports in recent years.

He also invested in a venture capital fund to buy and modernize sugar refineries--a once-profitable export industry nearly devasted by regulation, contentious unions and government ownership. The sugar refineries complement the group’s Pepsi-Cola bottler in Guadalajara, Mexico’s second-largest city.

The group’s auto parts company--a joint venture with Clevite Industries, a subsidiary of Pullman Co.--had to overhaul its business in response to the policy shifts of recent years.

It used to serve a captive market, supplying bearings to car assembly plants that were under government pressure to buy locally made components. But when the government started to put a premium on exports, rather than local sourcing, it shifted to manufacturing replacement parts for the U.S. and Mexican markets.

Clevite’s experience is being repeated over and over again throughout Mexican industry, Gallardo said.

“Mexico has undergone a massive transformation,” he said. “The fact that it entered into the GATT (General Agreement on Trade and Tariffs, a 77-nation trade organization) made it have to be competitive with the rest of the world. That has meant for all of us in industry enormous changes of all sorts. Many areas that we thought were going to be productive are no longer there, and others that we hadn’t even thought about are surfacing that are very interesting. “

Gallardo--a workaholic whose schedule leaves little time for outside interests beyond his family--believes that opening the U.S.-Mexico border to trade through a free-trade agreement will complete the transformation.

“There has been so much said (about), ‘Why this urgency? Are we rushing into something?’ Well, no, the world is changing at a dramatic speed. It’s in both of our interests to make sure that we get ourselves organized in sync with the rest of the world.”