Mexican voters do not want the airport project to continue, and serious economic consequences could follow.
Andres Manuel Lopez Obrador’s honeymoon with investors came to a screeching halt 33 days before he’s due to assume the Mexican presidency.
His decision to rip up a $13 billion airport project when he takes office in December sent markets into a tailspin. The peso sank 3.5 percent and pierced 20 per dollar, the stock market lost more than $17 billion in value and JPMorgan Chase & Co. slashed its 2019 economic growth forecast, saying the central bank will now likely have to raise interest rates to slow capital flight.
It’s not so much that investors loved the airport project. It was far from perfect. The problem, though, is that calling for its termination — just one day after a haphazard referendum indicated a majority of Mexicans disapproved of the project — sent a broader message to investors: Existing contracts can be pulled at a moment’s notice. It’s the airport construction today and, perhaps, oil contracts tomorrow and mining the next day. For an investor community that was always leery of AMLO, as the leftist is known, it’s an unnerving message.
The referendum “sends a grave message of uncertainty to international markets, to investors and to all Mexican citizens,” Juan Pablo Castanon, the national business chamber head whose handshake with Lopez Obrador in July helped to calm markets, said at a news conference Monday. “It’s a breach of the commitments of the Mexican state and a breaking of the current legal framework.”
While Lopez Obrador made canceling the airport one of his campaign promises, Mexican assets rallied following his election as he met with businessmen and pledged an orderly transition.