Incoming Mexican president Andrés Manuel López Obrador said he plans to scrape an American airport with a population of $…
Incoming Mexican president Andrés Manuel López Obrador said he plans to scrape an American airport with a population of $ 13 billion after a “people’s investigation” considered it undesirable, concern about investors and lower pesos worse.
The President-Selected on Monday, he had decided to “obey the citizens’ mandate” by abandoning the project on a dried sea bed in Texcoco, where construction began in 2015. Mexico will instead build two landing lanes at a nearby military airport and invest to improve the existing Mexico City full-capacity, expanding operations at an airport in the city of Toluca.
The decision raised business interests that the new administration, which will be sworn on December 1
, is not allowed to respect long-term contracts. Peso was by far the biggest loser among the major currencies that traded against US dollars on Monday.
As López Obrador, the weakening currency was trading 3.2 percent lower to 19.97 per dollar – the weakest level since the beginning of July. Mexican stocks also deepened early losses, with the IPC share index down 2.5 percent at 44,665.86, a quarter-month low.
López Obrador called the citizen’s voice “wise” and declared the decision a victory for birds and environmentalists who had looked at the giant project like ecocid. He also argued that the new plan would save taxpayers 100 billion pesos (5 billion pounds).
Gabriela Siller, chief financial analyst at Mexico’s Banco Base, said the cancellation could increase the perception of sovereign risks, restrict fixed investment in Mexico and reduce long-term economic growth potential.
A 30-year bond issue issued by Mexico City Airport Trust, due in 2047 fell as low as 79 cents on the dollar and dampened its return to more than 7 percent. It had traded as high as 92 cents on the dollar as late as the end of June.
The large airport project – covering 5000 hectares – already has a partially built flight control tower. Some 500,000 tons of concrete and 100,000 tonnes of steel have been lowered in the base of the X-shaped terminal building in Texcoco, where structures designed to keep the roof already built. The site considered three landing lanes, each 5 km long.
Enrique Calderón, director of the Arturo Rosenblueth Foundation, responsible for counting the elections from the four-day unofficial investigation, said that a total of 1.07 million people voted in the vote – about 1 percent of voters.
The International Civil Aviation Organization has demanded a complete technical study with concern that simultaneous operations at Santa Lucía and the current Mexico City airport could lead to collisions or the need for flights to be pushed so much that traffic volumes should fall.
López Obrador insisted Monday that the Santa Lucia option was “viable” from a technical perspective and that entrepreneurs can expect the same volume of work at Santa Lucia as they have been employed at the Texcoco site.
The incoming administration claims that the contracts will be respected, but legal experts say that scrapping Texcoco can constitute a bond standard and expected legal challenges.
Juan Francisco Torres-Landa, managing partner at Global Law Firm Hogan Lovells Mexico, expects repercussions from airport decisions.
“Our customers say they have a huge appetite to invest in Mexico, but they need legal certainty to do that,” said Torres-Landa. “Mexico is a potential investment target – there are many areas where these investors can play.”  Critics said that the new president would regret the scrapping of Texcoco. “The decision of @ lopezobrador at the new airport will be remembered as one of the worst stupidities of a president in today’s economic history. I hope I’m wrong, “Tweeted Enrique Cárdenas, a professor at Iberoamericana University in Puebla.
Gustavo de Hoyos, Head of Coparmex, a Business Union, said that investors would blame “every peso” of losses that followed the cancellation of the airport at López Obrador and said the decision “Will define its presidency.”
Cancellation of the project has also raised concerns that local pension returns will be affected. Mexican pension funds have delivered just over 10 percent of the funding of the current project.
Pension fund meeting Amafore said Monday that retirees would be unaffected and that airport funding only corresponded to 0.4 percent of the savings monitored by Afore’s pension network. The Afores hold bonds and are bought for an investment trust called Fiber -E, supported by passenger charges from the existing go or future airports.