Los Yuppies : Mexico’s Young Entrepreneuers are Combining Family Connections and Capitalist Tools to Move up in Business and into the Social Fast Lane.

It is 2:30 in the afternoon in Mexico City, and fleets of Town Cars, Cadillacs and Thunderbirds are arriving in Polanco, a neighborhood of old mansions that Mexico’s economic miracle has transformed into a collection of smart little restaurants and boutiques. At Isadora’s, where the glass is beveled and the pastry dough is paper-thin, businessmen in Armani suits and Hermes ties briefly lay down their cellular telephones to pick up luncheon menus. At other tables, young women with the reddest of lipstick and the highest of heels chatter nonstop over filet mignon, pausing only to pick up their own cellular phones and check on their children, their husbands, their home deliveries.

Later in the day, the sleek cars move on to Polanco Pavilion, a marble-and-glass bazaar of imports. Here English seems as prevalent as Spanish. Shops market “bestsellers,” “folk art” and “popcorn,” speaking to potential customers in the language of the Yanqui.

The buyers are Mexico’s new rich, born in the 1960s, come of age in los anos negros, the black years of the 1980s, and thriving in the government’s 3-year-old, full-scale venture into a free market economy. In a country of 82 million where everyone but the rich struggles, they are conspicuous consumers of European couture, American fast food, Mexican real estate and weekends in Cuernavaca, Acapulco or newly popular resorts like Valle de Bravo.

It would be nice to say that theirs is a rice-to-riches story. But in the glittery world of los nuevos ricos, everyone seems to be only an uncle, a father or a cousin away from old money. So prevalent are contacts in this set that who you know isn’t even a question. Connections? shrugs Carlos Meltzer, the son of a wealthy businessman and a budding financier himself, “Everyone has them.” Their pedigree is the reason men and women like Meltzer are called “juniors.” Their tastes and embrace of the go-go U. S. style explain why they are also called los yuppies. But while they often still live with their wealthy parents--after all, this is Latin America--they aren’t living off them.

They are the backbone as well as the beneficiaries of Mexico’s economic boom. They’ve learned to make money the new way. Instead of depending on government contracts and protective tariffs, they are starting up new companies and revamping older ones, moving into the office towers that seem to be going up everywhere in this capital city of 18 million. They are trading securities on the Bolsa Mexicana de Valores, the stock exchange, and paying billions of dollars for banks, telephone companies, sugar mills and anything else on the must-sell list of a government bent on privatization. Franchises for Baskin-Robbins, McDonald’s and Domino’s Pizza are all sold and bought by the new rich.

For fun, the young entrepreneurs might hit the racetrack on one night and a private discotheque on another. Pop concerts have become increasingly popular: The rich and their children fork out $33 apiece to hear music that runs the gamut from Diana Ross to rock bands such as La Maldita Vecindad y los Hijos del Quinto Patio (The Damned Neighborhood and the Sons of the Fifth Tenement).

But having too much of a good time is frowned upon. The day ends with friends, but it begins with the Wall Street Journal and El Financiero, a Mexico City newspaper that reports every wrinkle of the recently negotiated North American Free Trade Agreement. “They’re more American in the way they do things,” says Rene Espinosa, the director of international affairs for a Mexican business association.

In the country’s newly bustling economy, the line between El Norte and Mexico is beginning to blur. For the Mexican upper class, life is clearly improving. “Everything is closing up there and opening here,” said Adrian Robello, 34, a chiropractor who charges $20 an hour (the average Mexican wage is approximately $10 a day) and says he has no shortage of clients. Robello and others expect the Mexican boom to soar further if the U.S. Congress approves the trade agreement this spring.

The reversal in economic fortunes was sudden and marked. After heedless borrowing and spending in the 1970s, Mexico “went to hell” in the 1980s, one junior recalls, and many young Mexicans chose to watch the chaos from the sidelines. They waited it out in the sanctuary of the top business schools in the United States and Mexico. Then, in 1988, the country’s former budget minister, Carlos Salinas de Gortari, a Harvard-trained economist, was elected president in a razor-thin and disputed victory. Many Mexicans believed that the Institutional Revolutionary Party--the citadel of power in modern Mexico--had stolen the election. Among the disenchanted voters, few trusted Salinas and his promises to reinvigorate the economy.

But within a year, Salinas was turning doubters into believers. The country’s massive debt was restructured; inflation fell below 20% (the annual rate had been as high as 159% in 1987); per capita income, stagnant through most of the 1980s, has risen 2% a year since 1990 and now stands at $3,376; government-owned businesses were put on the block, onerous government red tape was cut and the free trade talks began. Suddenly, Mexico looked good. It began to attract foreign investment--more than $16.2 billion under Salinas so far. Dollars that had been deposited abroad came home.

SO DID JUNIOR. “WHEN IT BECAME CLEAR THAT THINGS WERE CHANGING, I DEcided the action was here,” says Armando Santacruz, a 30-year-old Harvard MBA who had been working for a paper company in San Diego when Salinas was elected. Santacruz and a boyhood friend, Eugenio Manzano, a 31-year-old Stanford MBA, founded Grupo Pochteca, a $12-million-a-year company dealing in high-grade imported paper used in packaging and glossy magazines. They have structured the firm to compete head-on with an increasing number of U.S. paper companies expected to come into Mexico under the free trade pact.

Santacruz’s office features a collection of works by lesser-known Mexican painters and the background music ranges from salsa to sonatas. The business strategy, however, is 100% American. The young partners believe that Mexican paper suppliers, like those in the United States, eventually will not only deliver the product but cut it to precise specifications. The emphasis is not price but quality, an approach developing slowly in Mexico. When Santacruz tried to persuade a local shampoo manufacturer to upgrade his packaging, the customer’s initial response was that the recommended paper was too expensive. Then his top two lines ran into heavy foreign competition. “He came back on his own and said he was ready to buy,” says Santacruz.

Pochteca is a microcosm of what is happening all over Mexico: Business is upgrading equipment, training workers, forecasting and targeting profitable niche markets. To prepare for the onslaught of competition, Pochteca sends its clerical and factory workers to seminars. The first lesson? “Time is money,” Santacruz snaps. The second? “We can do it.”

But slogans are sometimes not enough. The electrical power, for instance, goes off from time to time, and one of the company’s machines has to be reset after every outage. That takes only 10 minutes but, grumbles Santacruz, sounding positively gringo-ish, “that’s 10 minutes that payroll and orders don’t stop, that you can’t be doing anything else.”

Santacruz, more than six feet tall with sandy brown hair combed straight back, is less formal than most of Mexico’s young businessmen. He is also among the minority who live alone. “I felt like I was using my parents’ house like a hotel,” he says sheepishly, but quickly adds that not a week goes by without sitting down to dinner with Mama and Papa. His weekends are spent cooking for his friends in a loft-like apartment in Coyoacan, one of the city’s oldest neighborhoods, where the literati go on Sundays to stroll the squares and eat sandwiches at one of the sidewalk cafes.

How do Santacruz and his fellow Mexican yuppies compare to their American counterparts? Most U.S. stereotypes center on baby boomer businesspeople, workaholics with a penchant for making big money and spending conspicuously. Greed, critics said, fueled their ambitions. In Mexico, traditions have kept los nuevos ricos in check. An American diplomat who once worked on Wall Street says that few Mexicans pull the all-night work sessions that are common in the American financial community. And the Sunday family meal is as sacrosanct as the two-hour lunch break during the week. But, yes, Mexico’s new rich love to shop.

EVERYTHING SEEMS TO MOVE AT DOUBLE-TIME IN THE DOWNTOWN OFFICE OF Operadora de Bolsa, the second-largest brokerage firm in Mexico. Word processors click at the touch of polished fingernails, high heels clack against hardwood floors. By 10 a.m., many of the company’s traders have already been at work for several hours. Those who find their English skills wanting arrive early for a finance class in the language of Wall Street, zip upstairs for a power breakfast with one of their clients in the company dining room, go back downstairs to work the phones until the 2 p.m. lunch break and then return to finish up in early evening. One broker tries to practice her English during an interview, then abruptly gives up. “The truth is, I can’t stand to speak that slowly,” she says, breaking into rapid-fire Spanish.

The frenzy takes its toll. In mid-June, the stock market went into a nose-dive after some negative comments by Ross Perot about the free trade agreement. As prices fell, Alejandra Caso, tall, blond and bright, broke out in a rash. “Nerves,” she says, touching the red patches on her cheekbones. The mutual funds trader used to take Spanish dance classes to relax, but her irregular schedule forced her to drop them.

Women traders are still a distinct minority, but their numbers are growing. Gloria Andres Lopez, a 29-year-old assistant director at Operadora who has been selling securities for six years, attributes the increase to the fallout of the 1987 worldwide stock market crash. The collapse finished many brokers, particularly those who had taken incautious positions. “Even if it’s untrue,” Lopez says, “there’s the perception that women took fewer risks.”

Except for her gender, Caso is the very model of the modern Mexican trader. She’s young (26), bilingual, the child of a successful architect and a graduate of the Universidad Panamericana, one of the country’s top colleges. To get into schools such as hers or the Instituto Tecnologico Autonomo de Mexico, young Mexicans need high grades, high test scores and strong recommendations--a combination that is unlikely to occur if the youngster was unable to afford a private elementary and high school education. Only 10% of ITAM’s students come from public schools.

If the children from the best homes get into the best universities and get the best jobs--well, that’s the way things have always been in Mexico, and Caso, modern though she is, is no rebel. “They say these brokerage houses are elitist,” she says, turning to look beyond the glass wall of her office onto the trading floor. “In a way, it is,” she concedes. “But look: If I’m going to hire someone, I’m going to tell a friend. What do you do? You tell a friend.”

Like their American counterparts who worked on Wall Street a decade ago, traders at Mexico’s 26 brokerage firms are on an exhilarating ride to riches. Last year the stock market rose 118% and, although in mid-September it was down by nearly 10% from a year ago, brokers expected it to recover in time to earn their bonuses. Most stockbrokers take home the peso equivalent of between $4,000 and $20,000 a month and, on their giddy way up, earn perks like cars, secretaries and those ubiquitous cellular phones.

In a good year, Caso takes home $100,000, a sum that--particularly because she lives at home--buys her a lot of airline tickets, designer dresses and heels--always heels. “If you tell me, ‘Let’s go to New York,’ I go to New York,” she says.

Although Caso’s money gives her a certain amount of freedom, the rules for women from “good families” are clear. Caso feels constrained from going out alone or living with a boyfriend. On Thursday nights, she retreats with her girlfriends to La Ciudad, a sleek bar in the capital’s Zona Rosa district where three TV monitors play music videos. “Girls Just Want to Have Fun” was on the tube one evening, but the message, sung by an American pop star, may have lost something in translation. Women were clustered around some tables, men around others, and the sexes rarely mixed. Mexican mamas had little to fear.

The pull between the traditional and the modern is especially acute for Mexican women. “Women are more liberated but more confused,” says Guadalupe Loaeza, a keen observer of the new rich who has described them in her best-selling “Las Reinas de Polanco” (“The Queens of Polanco”). Hemlines illustrate Loaeza’s point. Mexican women, she says, “are likely to wear a short skirt and then fiddle with it all night, pulling it down. I think some women feel like exploding with all of the changes that are going on.”

The brokerage business and Mexico, however, are still dominated by men, young men like Friedel Landa, a 28-year-old graduate of the Instituto Tecnologico Autonomo, who could have gone into his father’s auto parts business but opted for the stock market. A slighter version of Richard Gere, Landa sets the strategy for traders at the Operadora de Bolsa, and takes home $300,000 a year for getting it right.

Landa, who also builds remote-control airplanes and takes real ones to Acapulco on his time off, is philosophical about living at home. “If I live with my parents, they are happier,” he says. But he quickly points out that his lifestyle may become an anachronism. “Mexican society is changing rapidly and all these traditions are getting weaker. Everything is more straightforward--even in relations with boys and girls. In the past, you would spend time with a girlfriend and the parents would get involved. Now it’s more straightforward. You like one another and things begin to happen. It’s the same with companies: You just go in and learn fast and if you’re good, you start climbing.”

If Landa is a traditionalist in his lifestyle, he is on the cutting edge in his professional choices. Increasingly, young Mexican men like Landa and Santacruz are opting out of the family business and striking out on their own. Meltzer, the young financier who is fluent in the lexicon of business-speak, calls it the “defamilization” of Mexican business.

IT’S HARD TO SAY HOW MANY Mexicans belong to this privileged group, but status symbols seem as good a measure as any. Cellular telephones are one indicator; there are some 200,000 in the hands of Mexicans. The approximately 163,000 brokerage accounts offer another gauge of privilege, according to some economists. The ultimate status symbol: shares in one of the 18 banks auctioned off by the government in the last three years. About 130,000 Mexicans hold that distinction.

Behind each status symbol is another Mexican success story. The country’s largest manufacturer of cellular telephones is the cleverly named IUSACELL, a company that didn’t exist three years ago; now it has four floors in a building with a smoked-glass facade on Avenida Presidente Mazaryk, Polanco’s Rodeo Drive. Owned by the Peralta family--old money, the wealth came from copper and manufacturing utility meters--IUSACELL won the exclusive government license to distribute cellular phones in Mexico City.

Sales have doubled every year since 1989, employment has swollen to 500 from 30 and Moris Shamah, the general director, sees no way but up. With the cellular phone almost a necessity, it wouldn’t seem that IUSACELL has to worry about marketing. But just in case, it offers its sales staff plenty of incentives to move its product. Aaron Gomez Escobedo, the assistant commercial director for Mexico City, says he can double his $3,750-a-month take-home pay if he meets his targets. As a rule, he does.

Not all of Mexico’s old rich have made the leap so easily to the new economy. Many of that generation have stumbled, including Armando Santacruz’s father, 60, a manufacturer of plastic toys. In 1988, the import duty on plastic toys evaporated, and so did much of Santacruz senior’s business. “The opening of the market has been brutal,” says Santacruz Sr., as he sits behind a desk cluttered with paper, toys and packaging materials. In the past, “you used to make a little calculation on a piece of paper as to prices and the market, and then you’d produce. Now you have to think globally.”

Even along Presidente Mazaryk, the avenue of chic outdoor cafes and boutiques, some businessmen are nervous about keeping up in the new Mexico, where the well-heeled are demanding imports, efficiency and service. “The smaller establishments are getting crushed,” say Ilel Valladares Castaneda, the 36-year-old general manager of Canapes, a retail store that sells cold cuts and other European-style goodies.

Still, he predicts that if the government eases up further on bureaucratic regulations, competition will eventually bring efficiency--”like McDonald’s”--to smaller companies. And, even Santacruz Sr. believes that in the long term, the new economics of Mexico are “going to be good.” But he is a realist. In the new Mexico, he says, “a lot of businesses are going to die.”

Exit senior, enter junior. Many of the new businesses were jump-started by men whose family companies are foundering. In Mexico’s creaky and cautious financial system, Santacruz and Manzano were able to launch their paper company only because their families had the financial wherewithal to co-sign their loans. Their relatives stepped in once again when the company ran into a cash crunch. Those options, Santacruz readily acknowledges, were closed to most Mexicans. “Banks have low-risk profiles,” he says. “Right now it would take a poor Joe off the street three times as long as it took us to get going. It’s terribly unfair and not good for the country.”

Young Santacruz believes Mexico will not become egalitarian until the Institutional Revolutionary Party loosens its 63-year-old grip on the country’s political scene. “The country is still run in a paternalistic style,” he says. “If you want to be in the world economy, you need adults and you’re never going to get adults if the government treats people like children. Employees still expect the patron to take care of everything.”

Santacruz is one of the few rich eager to offer opinions on politics. He also drives a modest car because, he says, “it gets insulting” to workers if their employer is ostentatious. But Santacruz is an exception. Conspicuous consumption--Rolex watches and Mont Blanc pens--is in. Although Mexico’s newly wealthy sometimes provide for their nannies and drivers and contribute to the education of the children of household help, they are not known for philanthropy. Most keep their attention fixed on business or social plans.

Another favored son is Santacruz’s Harvard Business School classmate, Thomas Egerstrom, the Mexican-born son of a Swedish immigrant. Egerstrom junior returned to Mexico City in 1987, at the same time his father was selling off a group of companies, and was rewarded with one, Duroplast, a nearly defunct telephone equipment manufacturer. When President Salinas promised to make Mexico an export base for U.S. auto makers, young Egerstrom took him at his word, and he retrofitted the firm to produce oil filters. After investing $6 million in modernizing and retraining his work force, Egerstrom has contracts with Volkswagen and Chrysler.

Egerstrom, tall with the look of a Midwestern banker, is more formal than his old classmate Santacruz. When Egerstrom Sr. left for Sweden, his chauffeur began working for junior, who lives on the family estate outside the capital. There, he rides horses for pleasure and entertains friends for Sunday lunch. Asked how much he pays the blue-collar workers at Duroplast, he phones a secretary to check and smiles when he hears the answer. “You’ll probably think I’m the old kind of Mexican,” he says. They get $10 a day, twice the minimum wage but no bonanza.

Carlos Meltzer, the energetic, 25-year-old UC Berkeley graduate with connections, recognized early on that Mexico would soon have a huge demand for capital. He took a business plan in January, 1991, to the San Francisco office of Public Financial Management, which arranges financing for major public works projects. He persuaded the company to venture into Mexico, using him as a scout. Recognizing the need for a partner in Mexico, Meltzer teamed up with Serficor, a financial advisory firm whose director, Leopoldo Bruillo, knew the right people. Bruillo’s cousin is tied in with Emilio Azcarraga Milmo, Mexico’s No. 1 media mogul. Now Meltzer and Bruillo are rounding up capital for everything from toll roads to dams. “It was good timing,” says Meltzer, who spends his time between dinners in San Francisco and breakfasts at Mexico City’s $180-a-night Marquis Hotel, where mergers are brokered by multilingual young businessmen in a marbled setting.

ON THE RIDE TO VALLE DE Bravo, the economic divide begins where the $6 toll road splits from the old highway. Most motorists take the free road; the big sports vans of the rich pull up to the tollgate. But there are poor living along the rich man’s road too. A peasant woman milks a cow on the roadside, where a stand of pines barely conceals a private tennis court for weekend visitors. Closer to town, three young Mexicans in Lycra shorts and safety helmets wheel over the cobblestone road on their imported Trek mountain bikes. Farther on, a farmer astride a little burro herds his donkeys home.

Two-and-a-half hours northwest of smog-enveloped Mexico City, Valle--as weekenders call it--is sweet with the smell of mountain pine and the sound of birds. At the Golf Hotel Avandaro, Mexican businessmen hit the courses early. Later, they lounge at poolside with their families. Adrian Robello, the chiropractor, is here with his wife and 14-month-old daughter. A maid trails after the diaperless toddler, trying to coax her to sip from a carton of juice. The Robellos are emblematic of the new Mexico. When he opened his practice five years ago, Robello says, he could charge only $5 a visit, and most people confused a chiropractor with a huesero, or bone setter. Now he pounds the backs of the new rich, and gets paid handsomely.

Many pass Valle’s warm afternoons in the courtyard at El Vegetariano, where the waiters, dressed in faded jeans and blinding-white tennis shoes, exude the same calculated cool as the customers. Faviola Quiroz, a 20-year-old model in wraparound sunglasses, is having lunch with her 29-year-old boyfriend, Ricardo Padilla, a photographer whose hair is tied in a ponytail and who travels in the bohemian crowd. Quiroz has just made $2,000 on a shoot for Coca-Cola. Padilla, whose parents are in the pharmaceutical business, says he has plenty of assignments. That wasn’t the case in Boston, where he was living before the American recession propelled him home. “People have become a little more open,” says Padilla of his homeland. “They’re not so religious, they don’t see us as a threat.” Gays, musicians, juniors--they’re all his friends, Padilla says.

The scene in Valle is easy to find; just follow the line of heavyweight recreational imports from El Norte, Dodge Ram Chargers and GM utility vehicles. By 7 p.m., they have arrived at Los Churros Rellenos. At tables topped with butcher paper for budding crayon muralists, parents and their maids feed hamburgers and fries to the children of a new generation. (A couple of hours later, the adults will adjourn to DiCiro’s, across the street, for pasta, and their teen-age children will take over Los Churros.) Alejandro Albert, 42, and his wife, Rosa, 29, are urging their young son to eat. The Alberts have their own graphics design shop in Mexico City and they’re modernizing, getting ready to meet the competition. “You know, buying computers and things like that,” Albert says.

Even in the shelter of Valle, however, los nuevos ricos are cautious about celebrating their accomplishments. The promise of the free trade accord has kept the foreign dollars flowing into the country, but it must now be approved by the legislatures of Mexico, the United States and Canada. The Mexicans know the United States can still surprise them, and they worry that the pact is already becoming a political football in the U.S. presidential election. There is one characteristic the new rich share with the old: They are always looking over their shoulders for the next economic disaster. Each new president of Mexico makes promises, Albert says. “We all have faith, but nothing is certain.”