Mexicans want the government of President-elect Andres Manuel Lopez Obrador to scrap a $13 billion project to build a new international airport for the nation’s capital city, instead choosing a cheaper alternative that calls for upgrading and expanding existing facilities. Yields on airport bonds surged to a record.
In a four-day nationwide “consultation” ending Sunday, nearly 70 percent of the 1.07 million participants voted against the completion of one of the country’s biggest-ever infrastructure projects. Organized and funded by Lopez Obrador’s Morena party, the consultation tallied the results from polling stations in more than 500 towns. Plans for a door-to-door survey, to be carried out in the final days of the consultation, were scrapped before voting started.
Sited in the Mexico City suburb of Texcoco northeast of the capital, the new airport was slated to replace the cramped and aging Benito Juarez International, which was Latin America’s busiest last year. The airport became a political lightning rod during this year’s presidential campaign as Lopez Obrador, known as AMLO, gave conflicting signals about his intentions after vowing to cancel the project that’s already cost billions and is more than a third of the way to completion.
“All eyes are on AMLO and the comments he makes today,” said Shamaila Khan, the director of emerging-market debt at AllianceBernstein in New York. “I don’t think he can disregard the results, but he can make sure that the bondholders are not impacted by the results.”
Campaigning as an anti-corruption reformer ahead of the July 1 election, Lopez Obrador charged that the project was rife with graft and a waste of taxpayer money. Following his victory, the president-elect proposed holding this week’s public consultation, which analysts say allows him to keep his options open with contractors and voters alike. The cost of canceling now could be as much as $10.5 billion, according to BBVA Bancomer analysts.
Lopez Obrador has yet to comment on the results.
Scrapping the project could accelerate the payment of principal and interest in $6 billion of bonds that the group in charge of building it issued to finance the construction. Although the decision should not imply a downgrade to Mexico’s rating on its own, it could pressure it and raise uncertainty regarding the strength of the rule of law in doing business in Mexico, BBVA said.
The peso plummeted about 1.6 percent as of 8:28 a.m. in New York, the most in emerging markets, to 19.6730 per dollar. The airport’s bonds joined the peso, posting the worst performance since their issue date. Yields on airport bonds maturing in 2047 rose 44 basis points to 7.3 percent.
Lopez Obrador has pledged to respect the consultation’s outcome, which is non-binding and technically not a referendum, as the National Electoral Institute did not participate.
The consultation’s logistics were developed and coordinated by the nonprofit Arturo Rosenblueth Foundation. Volunteers oversaw the 1,073 voting stations in 538 municipalities around the country.
–With assistance from Justin Villamil.
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