Ricardo Salinas Pliego

There is a new “tiger” in Mexico’s broadcasting industry. His name is Ricardo Salinas Pliego and, as president, chairman and chief executive officer of TV Azteca, he has accomplished a feat few dared even try.

Less than four years ago, he set out to challenge Televisa, the media empire built by the late broadcasting “tiger” Emilio Azcarraga Milmo. Salinas bought Channel 13 and turned the weak, state-owned station into TV Azteca, which now controls roughly one-third of Mexico’s TV advertising market. He is in the midst of negotiations to establish a media presence--perhaps a TV station or a partnership with an existing outlet--in the United States. The deal could close as early as this week.

Salinas, whose personal wealth is estimated by Forbes Magazine at $3.2 billion, is considered a controversial figure among Mexico’s new brand of corporate executives. His demeanor can be as soft as silk when making a point or abrasively tough. He is notorious as well because of his close friendship with now-imprisoned Raul Salinas de Gortari, brother of former president Carlos Salinas (no relation), and alleged problems surrounding some of his dealings with various business associates.

The grandson of a businessman who owned a chain of appliance stores, Salinas, who received an MBA from Tulane University in New Orleans, originally joined the family business, Elektra, in 1981. Today, Elektra is the top retailer of home electronics and furniture in Mexico. Salinas is also president of Hecalli, a retail clothing store he founded that has outlets throughout Mexico.

At the same time, Salinas is a partner of Western Union in the huge electronic money-transfer business. The company moves approximately half of the $6 billion that Mexican workers abroad send home every year. The transactions are wired to offices located in the Salinas chain stores, where they can be cashed or converted immediately into merchandise. His Radio-Cel and Biper paging company adds an average of 10,000 subscribers a month and is the market leader.

A fan of Bill Gates, Salinas, 43, keeps a copy of Gates’ book “The Road Ahead” in his extremely modern, yet modest office. He lives in Mexico City with his wife, Ninfa, and their three young children Ninfa, Benjamin and Hugo.

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Question: What made you try to compete with a powerful monopoly like Televisa in Mexico’s broadcasting market?

A: We saw there was a historical opportunity to challenge Televisa when President Carlos Salinas decided it was time to end the monopoly. The president was fed up with spending tax dollars to subsidize a state channel that had no audience. He also realized that having the weak, state-funded TV Channel [13] actually strengthened the monopoly. A broadcasting monopoly created an unbalanced political situation that made the state vulnerable. This is the context for the privatization of TV. You know the rest. We got [Channel 13 which became] TV Azteca because in the blind bidding action we paid 30% more than the next bidder.

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Q: How much did you offer?

A: $645 million. The next offer was for $500 million.

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Q: Many people wonder how you, lacking the know-how or experience, decided to buy a broadcasting company. After all, your past experience was selling household goods.

A: An entrepreneurial mind is always looking for new opportunities. When the initial rumors on the privatization of the state television began circulating in 1991, I told myself, if Emilio Azcarraga has made so much money in television, broadcasting must be a good business. Then I conducted a thorough analysis of the business and realized that it is not only a great business but a superb vehicle to influence change in the country. It provides you with a chance to build a more democratic society, a freer place.

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Q: Raul Salinas, the president’s brother, invested $29 million in your company. Didn’t that help you win the bid?

A: The participation of Raul Salinas in this business is irrelevant because the amount he contributed to put together the deal is less than 5% of the total package. Bidding $145 million more than the next bidder helped me. To tell you the truth, I don’t need my friends to help me that way! He bought a bond and has no shares in the company. We owe him that money and we’ll pay him back this year.

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Q: What has been your strategy to compete with Televisa?

A: We’ve put an emphasis on news. The newscasts are the soul of this operation because that is what puts us in contact with the people. And it has been precisely in the news where we have hit them harder. We inaugurated a new style of broadcasting news in Mexico. It’s fast-paced, young, aggressive and it has changed the style of broadcast news in Mexico.

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Q: Your critics say your broadcasts are too pro-government.

A: That’s false. We’ve been very critical of the government in issues such as public safety or the absence of the rule of law. Obviously, we don’t disagree with everything the government does.

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Q: Why are the soap operas in your network so controversial?

A: We have made some very important novelas. Our first soap, which put us on the map, dealt with government corruption and the assassination of presidential candidate Luis Donaldo Colosio. These are issues that had never before been discussed on television. That would hardly qualify as being pro-government, right?

Another soap deals with drug trafficking corruption in Mexico and its collusion with the U.S. Drug Enforcement Agency.

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Q: Are you saying there is a corrupt connivance between Mexican police and the DEA?

A: I am positive there is a collusion among them--or do you believe that we, the Mexicans, are the only bad guys in the picture? Who sells the drugs in the U.S.? Who keeps the money? There has to be complicity, otherwise, the U.S. police forces would be the most inefficient police in the planet and they should all be fired.

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Q: What is TV Azteca’s share in Mexico’s advertising market and how large is the audience?

A: We have 33% of the advertising market and we reach 97% of the Mexican population with one channel and 94% with another. A potential audience of 90 million Mexicans every night. We own 300 TV licenses; 12 sound stages to produce soaps, news and entertainment. We produce 10,000 hours of video annually. And we are fighting against a competitor who owns four channels, two of them national like ours. They have more resources than us, but we are the low-cost competitor so we can be very effective.

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Q: I understand you are beginning to expand internationally to Chile, El Salvador and in other countries.

A: Yes. It is only natural for a product like ours to have a strong demand in Central and South America. People there are used to the Mexican accent because of Televisa’s product. So, when broadcasters abroad see another option to buy a Mexican product they open their doors. We can sell our product or buy TV stations there.

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Q: What about Spanish language television in the U.S.? Is it true you are seeking an agreement with Telemundo?

A: Sony beat us in the bid. But we might work with Sony, helping them with Telemundo, a network that desperately needs Mexican programming. Univision is now killing them with Televisa’s programming. If Telemundo does not have our product it will be harder for them to compete with Univision.

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Q: If this partnership with Sony does not work out, would you contemplate creating your own network?

A: One way or another, TV Azteca will be in the U.S. And that will bring us big revenues.

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Q: Your stores, Elektra and Hecalli, have had impressive growth, but there have been allegations that the interest rate charged is too high for your customers, among the poorest people in Mexico.

A: Elektra is the largest store of its type in Mexico. We now have 600 outlets, and 120 Hecalli stores. Elektra resembles a Circuit City plus a furniture department. Hecalli sells basic clothing, somehow similar, albeit down-scaled, to the Gap. We have a 30% share of the market.

Customers can buy in cash and our prices are the lowest in the market, or they may choose a weekly payment system. Sixty percent of our customers prefer the weekly payment system. We have one million active accounts in a country with 20 million households because we give them the best value for their money. As Abraham Lincoln said, “You can’t fool all the people all the time.” Is it expensive? Compared to what? To having nothing?

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Q: But is the interest too high?

A: Yes. Because most of these people have no credit and no bank would lend them money. Besides, the administrative cost of a weekly payment system is expensive. I can also tell you that our mature portfolio amounts to almost nothing.

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Q: And there is also a class-action lawsuit against you and Western Union--alleging that you charge too much.

A: Well, there is a U.S. lawyer who believes he is going to get a lot of money from us. But we’ll see. People use our service because it is the fastest, safest and the best way to send money. That’s why people pay a premium. If you want to do it cheaper, you can buy a money order. Every three months we do 530,000 transfers. Do you believe we can trick 2.1 million people annually? . . .

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Q: You’ve been very successful, but I cannot say the same about Mexico. Don’t you agree?

A: I have two thoughts about it. Those who work in my companies are better off today than 10 years ago. We have also created a lot of jobs. We went from about 1,200 employees to 16,000 in 16 years.

Regarding Mexico, I believe there’s been a lot of progress. I truly believe people are better off today than 10 years ago. Just consider that in these past 10 years all the customers of Elektra have acquired durable goods they didn’t have before. I believe the reports that Mexico is going through very hard times are exaggerated. We would be better off if we hadn’t had to endure the government’s poor handling of the economy.

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Q: So you disagree with people who say the problems that insurgents are fighting against in Chiapas, poverty and inequality, are Mexico’s fundamental problems?

A: Chiapas’ problems are not representative of the country’s problems. Chiapas has had its problems for many centuries. The different Indian tribes that live there have always fought among themselves. In a way, there is a civil war going on in Chiapas and no rule of law. That is not the case in the rest of Mexico.

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Q: Isn’t poverty and inequality the same in Chiapas as elsewhere in Mexico?

A: No, it is true that there are too many poor people in Mexico and we wish it wasn’t like that, but how are we going to fix it? Calling for a revolution? Has [Subcommandante] Marcos, with his masks and guns, ever fed one human being? has he ever created a job? Has he been able to bring investment to Chiapas? No.

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Q: Crime in Mexico, especially in Mexico City has soared, why?

A: Because the government is incapable of exercising its power. The first responsibility of the state is to guarantee the safety of the people. And as it stands today, the Mexican government has relinquished its foremost responsibility.

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Q: Mexico’s transition to democracy has been difficult. Are you concerned with its pace?

A: Not at all. Democracy is the only civilized way to govern a country. We are still experiencing problems with our young democracy, but this is not a problem. Our biggest problem is in the judiciary. Our system of justice is obsolete and unfair. It takes them forever to do justice and justice delayed is no justice.

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Q: How do you see Mexico’s future?

A: The future of Mexico is bright. This is a great country full of opportunities for everyone because we have a lot of work to do. I am an optimist and that is why I invest in Mexico.

There are risks as well. Some are external--like the fall in the price of oil or the crisis in Southeast Asia that has affected us. There are also internal risks because many people are dogmatic or intolerant. People who want to impose their will by force, like the guerrillas in Chiapas. In this sense, TV should play a very important role, warning the people of these risks. It should also be positive on the side of tolerance and respect.