Airport Referendum Is Early Test for Mexico’s New Government: WSJ

Voters put future of nation’s top infrastructure project to the test, choosing between new Mexico City facility or converting a military base to alleviate overcrowding, an option that could alienate investors

MEXICO CITY— According to the Wall Street Journal, Mexico´s president-elect Andrés Manuel López Obrador on Thursday launched a controversial referendum on the future of the Mexico’s busiest airport, a move that could put his incoming administration on a collision course with investors by canceling the country’s top infrastructure project.

For the next four days, voters can opt to continue construction of a new $13.3 billion airport northeast of Mexico City that would replace the capital’s existing airport, or scrap it in favor of a less-ambitious option of converting a military base north of the city to complement the existing airport. The new airport is already about a third complete.

For business groups, the referendum represents an early test of Mr. López Obrador’s incoming government, which takes power on Dec. 1. An outcome against the main infrastructure project of departing President Enrique Peña Nieto will signal a negative start for Mr. López Obrador’s administration, some economists say.

“If we have a ‘no,’ I think markets are going to react negatively,” said Marco Oviedo, head of Latin America research at Barclays. “Obviously, if we have a ‘yes,’ the airport bonds will rally, and we’ll see a stabilization of other assets.”

President-elect Andres Manuel López Obrador casts his vote on whether to continue with the $13.3 billion airport to replace the current Benito Juarez International Airport in Mexico City on Oct. 24.
President-elect Andres Manuel López Obrador casts his vote on whether to continue with the $13.3 billion USD airport to replace the current Benito Juarez International Airport in Mexico City on Oct. 24. PHOTO: EDUARDO VERDUGO/ASSOCIATED PRESS

Discarding the new airport means writing off at least $5 billion USD spent so far, and could lead to holders of around $6 billion in bonds that were issued to finance the work demanding immediate payment.

Click here for full article on the Wall Street Journal



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