The scrapping of a $13 billion airport by Mexico’s next president through a hastily organized referendum in which less than 1% of the population voted is sending shivers through the spines of stakeholders in the country’s recently liberalized energy sector, with one expert calling it the “canary in the coal mine.”
Work at the Nuevo Aeropuerto Internacional de MÃ©xico (NAIM), the largest infrastructure project in Mexico’s modern era, has been underway since 2015 in the city of Texcoco east of Mexico City.
Investment in the project so far has totaled 100 billion pesos ($4.98 billion), and 175 billion pesos’ worth of contracts have been signed, according to Mexico’s ministry of communications and transport. The project has created 45,000 jobs so far, the ministry said last Thursday, citing a report by the Organization for Economic Cooperation and Development (OECD), with that number projected to reach 160,000 during the construction period.
Nonetheless, President-Elect AndrÃ©s Manuel LÃ³pez Obrador’s transition team followed through on a campaign pledge to hold a referendum on the airport’s future.
As a candidate, LÃ³pez Obrador initially promised to cancel the airport project, citing concerns over its cost and social/environmental impact. He then said he would allow the Mexican people to decide between continuing the project in Texcoco, or replacing it with his preferred option of building two additional runways at the Santa LucÃa military base near the capital.
Local press reported that slightly more than one million people voted in the referendum, for which final results were tallied last Sunday. Mexico’s population stands at just above 129 million.
About 70% voted for the Santa LucÃa option, with the remainder opting to stay the course in Texcoco.
In addition to widely voiced concerns over the referendum’s methodology and lack of transparency, the decision to reverse course on the airport sent a chilling signal to the energy industry of LÃ³pez Obrador’s willingness to follow through on his most controversial campaign pledges, which include halting bid rounds for operating stakes in oil and gas acreage.
The bid rounds were a staple of current President Enrique PeÃ±a Nieto’s 2013 constitutional energy reform, which liberalized the formerly state-dominated energy sector.
LÃ³pez Obrador sent “mixed messages” during the campaign and afterward about his views toward the opening of the energy sector and toward the private sector in general, said Juan Pardinas, director of the Instituto Mexicano para la Competividad (IMCO). He spoke last Monday during IMCO’s weekly webcast with energy think tank Pulso EnergÃ©tico.
The “uncertainty” has “transformed into certainty,” Pardinas said during the webcast. The decision sends “an unmistakable signal…of an enormous disdain for the role of private investment in economic growth and performance” for Mexico.
“The decision is to obey the mandate of the citizens,” LÃ³pez Obrador, popularly known as AMLO, said in a Monday morning press conference, “therefore we will build two runways at the Santa LucÃa military airport.”
The airport vote comes just one week after legislation introduced by LÃ³pez Obrador’s Morena party to make independent energy regulatory agencies ComisiÃ³n Nacional de Hidrocarburos (CNH) and ComisiÃ³n Reguladora de EnergÃa (CRE) part of the executive branch.
The proposal caused an outcry from the industry, analysts and leadership of the CRE and CNH, who said it would amount to the politicization of the agencies and that it would give an unfair advantage to state-owned energy companies PetrÃ³leos Mexicanos (Pemex) and ComisiÃ³n Federal de Electricidad (CFE).
Pulso EnergÃ©tico’s Pablo Zarate, director of information, said during the webcast the airport decision can be seen as a “canary in the coal mine” for what’s ahead in the energy sector.
The value of the Mexican peso against the dollar on Monday fell to its lowest level since June after LÃ³pez Obrador’s press conference.
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