NEWS ANALYSIS : Corruption Probe Threatens Mexico’s Privatization Plan

The widening corruption probe into former President Carlos Salinas de Gortari’s family wealth poses a growing threat to Mexico’s multibillion-dollar privatization plan, according to independent economic and political analysts here.

As prosecutors Tuesday continued to question prominent business people who made fortunes investing in Salinas’ privatization program--allegedly in tandem with the former president’s older brother--the analysts said the process of tracking more than $100 million linked to Raul Salinas de Gortari in overseas bank accounts may scare off potential investors here and abroad.

President Ernesto Zedillo’s government launched the investigation but is equally dedicated to selling the nation’s railroads, airports, seaports, telecommunications companies and petrochemical operations. The huge government auction--a continuation of the Salinas privatization program--is a cornerstone of Zedillo’s free-market economic policies and his plan to guide Mexico out of economic crisis.

Billions of dollars in potential investment by U.S. companies are at stake, and Zedillo’s government needs the investment to provide new jobs at a time when record unemployment here is fueling migration to the north.

Many seaports already have been sold, and several large U.S. corporations are considering bidding on the nation’s railway system. Zedillo’s government is drafting legislation to permit the airport privatization next year, and the president has vowed that the process will continue despite the scandals.

But, although Zedillo’s privatization is backed by progressive members of his Institutional Revolutionary Party (PRI), many in the Old Guard oppose it. The PRI was instrumental six decades ago in nationalizing many industries.

In addition, members of Mexico’s political opposition have said they hope to use congressional hearings starting this week on Raul Salinas’ role in the sale of the nation’s second-largest television network to question privatization deals made during the Salinas administration.

“Foreign investors are simply going to be much more cautious now--much more reluctant to make alliances with Mexican companies,” said analyst Rogelio Ramirez de la O, a consultant for several foreign companies with business interests in Mexico. “Fairly or unfairly, anyone who is regarded as nouveau riche is automatically going to be suspicious in the investors’ eyes.”

Reaction among some potential investors Tuesday was mixed.

“There has been a longtime relationship between our railroad system and Mexico’s, and the politics haven’t really affected it,” said John Bromley, spokesman for Omaha-based Union Pacific Railroad, which is planning to bid on part of the rail system. “We still think there’s potential.”

But Ann Thoma, spokeswoman for Illinois Central Corp., another potential bidder, said Mexico’s political and economic drama could affect that company’s plans.

The Mexican business leaders engulfed in the Raul Salinas probe are among the nation’s most prominent. Most of them bought into Carlos Salinas’ privatization program, some are potential investors, and all had business dealings with Raul Salinas, who is in jail here on murder and corruption charges.

Jose Madariaga, head of the Mexican Bankers Assn., who won the concession to one of Mexico’s first privatized banks, is scheduled to be questioned by prosecutors today about a bus distributorship he bought from the government in partnership with Raul Salinas. A third partner in the deal was one of Mexico’s most prominent television anchormen, Abraham Zabludovsky. Investigators questioned Zabludovsky, who denies any wrongdoing, for more than five hours Tuesday.

Ricardo Salinas Pliego, owner of the nation’s second-largest television network, was questioned for nearly six hours Monday about a $29.8-million loan he says he got from Raul Salinas to help buy the network from Carlos Salinas’ government for $669 million in 1993. The TV magnate, who is not related to the Salinas brothers, insists that the loan, which was channeled through the Cayman Islands, was a legitimate business deal that covered just 4% of the purchase price.

Meanwhile, Adrian Sada Gonzalez, who heads one of the nation’s largest financial groups, acknowledged in newspaper ads this week that Raul Salinas had deposited $15 million in Sada’s Swiss bank account for what he termed “a business project.” It was unclear whether Sada also would be called in by prosecutors.

Carlos Peralta, who won his bid to purchase the Salinas government’s concession to the nation’s mobile telephone network, told reporters earlier this year that he had deposited $50 million in Raul Salinas’ Swiss bank accounts. Peralta said he was told he was contributing to a venture-capital fund, but he said he had no receipts to document the transaction.

Analyst Ramirez cited a possible joint venture between Peralta and an American company in future telecommunications bids as one of several deals that could be affected by the expanding investigation. But he stressed that he believes the impact of the probe will be limited.