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(Bloomberg) – The incoming Mexican President Andres Manuel Lopez Obrador, the leftist who calmed investors through his initially market-friendly approach, has abandoned a $ 13 billion airport project backed by some of the men of the day. 39, the richest business in the country, causing a massive selloff in stocks, bonds and currencies.
Lopez Obrador abandoned the project after nearly 70% of the 1.07 million people who participated in a national referendum voted against the airport, one of the country's largest infrastructure projects . Airport operators fell and the peso and 10-year sovereign bonds fell to their lowest level in four months. BBVA analysts said this decision could create uncertainty about the strength of the law for doing business in Mexico.
"Our decision is to follow the mandate of the referendum," Lopez Obrador said at a press conference in Mexico City. "The citizen's decision is rational and democratic."
Located in the suburbs of Texcoco in Mexico City, northeast of the capital, the new airport was to replace Benito Juarez International, cramped and aging, the busiest of last year. The airport has become a political lightning rod during this year's presidential campaign. Lopez Obrador gave contradictory signals after promising to cancel the project, which has more than a third of its completion.
Just last week, Lopez Obrador downplayed the potential impact of a cancellation: "there will be no" macroeconomic imbalances, stock market problems or devaluations. "Today, as financial assets dropped, the decision was won" t affect the interests of companies and financiers, although he did not specify how, he does not expect to legal proceedings.
While Lopez Obrador said the funds are available to protect investors who bought $ 6 billion worth of airport bonds, the biggest concern is the impact on investor confidence. Until now, the new leader had succeeded in appeasing those who feared that the populist would take measures such as lowering the regulations that allowed foreigners better access to the oil and gas industry in the country.
Now, the new administration will maintain its proposal to add two tracks to a military base while modernizing the current airport and another in the city of Toluca, said Lopez Obrador, who is taking office than December 1st.
The peso fell 2.5% at 14:05. In New York, the worst setback since Donald Trump's election since the last election has raised fears that the US president will live up to the threat of tearing up the North American Free Trade Agreement. Airport bond yields maturing in 2047 reduced initial losses by 16 basis points to 7%. Airport operators also fell, in particular due to the 6.1% drop in Grupo Aeroportuario del Centro Norte, the largest intra-day decline since 2013.
At the four-day national "consultation" that ended Sunday, nearly 70% of the 1.07 million participants voted against the completion of one of the largest projects in the world. country infrastructure. Organized and funded by Lopez Obrador's Morena party, the consultation made it possible to compile the results obtained in the polling stations of more than 500 cities. Plans for a door-to-door inquiry, to be carried out in the final days of the consultation, were completed before the start of the vote.
Campaigning as an anti-corruption reformer, Lopez Obrador said the project was plagued by corruption and waste of taxpayers' money. He added that the alternative choice would save up to 100 billion pesos ($ 5 billion). Still, the cost of a cancellation now could reach $ 10.5 billion, according to BBVA.
The conflict between the Mexican airport and the first AMLO test: QuickTake
The dismantling of the project could speed up the payment of principal and interest of $ 6 billion worth of bonds that the construction group has issued to finance the construction. The new president said he would not ask airport bondholders to get haircuts.
(Add Lopez Obrador's comments on the consultation and the move of the peso.)
–With the help of Daniela Guzman.
To contact the journalists on this story: Andrea Navarro in Mexico at [email protected], Eric Martin in Mexico at [email protected], Justin Villamil in Mexico at [email protected]
To contact the editors responsible for this story: Carlos Manuel Rodriguez at [email protected], Alec D.B. McCabe, Philip Sanders
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