German Larrea Mota Velasco, the elusive billionaire who inherited and expanded a mining fortune, is suddenly Exhibit A for the difficulties of doing business in Mexico under an unpredictable president.
Larrea, 69, was dealt a severe blow after the government seized a section of his freight railway last week, ultimately prompting him to scrap a bid to buy one of the country’s biggest banks from Citigroup Inc. His view was that the acquisition would just be too risky given President Andres Manuel Lopez Obrador’s penchant for interfering in business matters, according to people with knowledge of the decision who asked not to be identified.
The mining magnate goes to great lengths to stay out of the public eye, rarely appearing at big events or granting interviews since he became chief executive officer of his family’s Grupo Mexico SAB in 1994. Over the past five years, he’s quietly doubled his fortune to some $30 billion on the back of surging copper prices, and had been looking to diversify the holding company by adding Banamex, the 130-year-old institution that Citigroup has been planning to sell.
Those ambitions ran up against AMLO, as the leftist nationalist president is known, and his criticism that previous “neo-liberal” governments “gifted” prized assets to a small group of connected businessmen. While Larrea and AMLO had largely avoided public clashes until now, recent bills targeting mining, along with the proximity of next year’s presidential election, have fueled escalating tensions.
From the start, AMLO inserted himself in the Banamex sale process by insisting the buyer be Mexican, avoid mass layoffs and preserve the bank’s extensive collection of Latin American art. In recent days, he started floating the possibility of the government taking a stake. Now, Citigroup has said it plans to hold an initial public offering for Banamex in 2025.
Through Grupo Mexico, Larrea oversees one of the world’s largest copper mining groups in Southern Copper Corp., which operates in Peru and Mexico. His GMexico Transportes SAB owns an extensive freight railway network of more than 11,000 kilometers (6,800 miles), mostly in Mexico but also with lines in Florida and Texas. He also has an infrastructure unit.
The deal to buy Banamex, for which he reportedly offered as much as $7 billion, was aimed at extending Larrea’s diversification away from mining and all its regulatory risks. In recent years he ventured into entertainment centers, movie theaters and shopping malls. He trails only fellow countryman Carlos Slim as the wealthiest Latin American, according to the Bloomberg Billionaires index. Slim’s Inbursa holds a 17% stake in the transportation unit.
“Grupo Mexico was asking — from what the finance minister told me after talking with Citi — for more guarantees,” Lopez Obrador told journalists Wednesday at a press conference. “Who knows what types of guarantees.”
In recent days, Larrea privately sought assurances that the banking industry wouldn’t become a target, asking whether similar moves might be attempted after the Banamex deal closed, according to people familiar with the matter. When no guarantee was forthcoming, he declined to move forward with the acquisition.
Grupo Mexico declined to comment on its CEO’s fortune, what led to the collapse of the Banamex deal or Larrea’s relationship with the president. The CEO tends to fly under the radar — when digging for details about the mining tycoon, there are no biographies, panel discussions or speeches to peruse. There are only a handful of public photos.
But a person familiar with his thinking said Larrea — an art buff, avid golfer and racehorse owner — is sitting on a large cash pile and had seen a push into banking as a natural way to diversify his business interests.
The noise around the bank and expropriation hit Grupo Mexico shares, though they rebounded strongly Wednesday on the news of a potential compensation agreement for the railway and that he won’t be spending big on a bank. The stock has returned 108% in the past five years, more than twice as much as Mexico’s benchmark equity index while also outperforming the Bloomberg World Mining Index.
Larrea’s relationship with AMLO had been relatively stable until recently. Even after he sent a three-page letter to staff and shareholders back in 2018 to warn of the risks of a Lopez Obrador presidency, they had managed to avoid major clashes.
Many of Larrea’s core businesses depend on government concessions, and while the rail seizure — some 120 kilometers of track key to a pet project of the president — was a fraction of his transport business, it raised the question whether other assets could be targeted.
At Grupo Mexico, Larrea has held sway for decades over the $36 billion company, which was founded by his father Jorge, known as the “copper king.”
While Jorge died in 1999, German, his mother Sara and the family still own about 60% of the equity in Grupo Mexico. Larrea is married with one daughter. His nephew sits on the board along with a cousin. His son-in-law, Leonardo Contreras, is an executive at a mining unit.
Grupo Mexico reported $3.3 billion of profit in 2022 on $13.9 billion of revenue, with about 40% of sales coming from Mexico. Mining still provided almost 90% of the company’s profit last year, with transportation and infrastructure making up the rest.
Several mining disasters have cast a shadow over the company in recent decades, particularly an explosion that killed more than 60 people in 2006 and a toxic spill into a river in 2014. In an impromptu interview given to a journalist standing outside the National Palace in 2019 — the only publicly available one — he said the company had compensated the victims and invested in clean-ups after the incidents.
Larrea, who holds an engineering degree from Anahuac University, has all but stopped attending business events to avoid the limelight. But he owns stables in Mexico and his mare Letruska has secured several first place finishes in the US in recent years.
“Without him, there would be no thoroughbred horses in Mexico,” Enrique Rodriguez-Cano Ruiz, a horse trainer and columnist who has crossed paths with Larrea for decades at the Hipodromo de las Americas racetrack, said in an interview from Mexico City. “He’s very low profile, He doesn’t watch the races of his horse down in the seats like most owners. Maybe he’s in the box, but it’s very rare to see a picture of him at the track.”
In October, Larrea paid $20.6 million for a 71st-floor condo in Chicago’s St. Regis tower, according to the Chicago Tribune.
“He’s a gentleman, but a man with that amount of money doesn’t walk with his feet on the ground,” said Cano Ruiz.