Mexico’s Incoming President Plans to Cancel Giant New Airport Project
Posted October 29, 2018 9:25 p.m. EDT
MEXICO CITY — Mexico’s president-elect, Andrés Manuel López Obrador, said Monday that he would cancel construction of an expensive new airport in the capital after voters rejected it in an informal voting procedure involving a small fraction of the population.
The decision to scrap the airport, a $13 billion project that is one-third complete, met with swift protests from Mexico’s business community, which warned that the cancellation could threaten the country’s economic stability by sending a message that investments may not be guaranteed under the López Obrador administration.
It also raised questions among investors about how much López Obrador, a leftist, will be guided by pragmatism and how much will he give in to his populist instincts after he takes office Dec. 1.
Citing the results of an unofficial vote organized by allies of his own party, in which fewer than 2 percent of Mexico’s eligible voters participated, López Obrador said his government would instead build two new runways at an air base north of the city to absorb the rising demand that has saturated the existing airport.
“The decision that the citizens have taken is rational, democratic and efficient,” López Obrador said.
But as he has done throughout his campaign and the transition, López Obrador walked a fine line between satisfying his supporters and attempting to reassure investors concerned that his tenure will lead to runaway spending and capricious decision-making.
“From the beginning of the analysis on this issue, we have made it clear that companies’ and investors’ interests will be safe,” he told reporters.
During the five-month transition period since his July election, López Obrador has bumped up against reality on several of his signature promises. He has walked back his pledge to take soldiers fighting the drug war off the streets and scaled back his ambitions to revive Mexico’s lagging oil production.
Although he briefly suggested that the new airport could be paid for with private money, Lopez Obrador has largely held fast to his promise to cancel the new airport and find an alternative.
The giant new airport, designed by British architect Norman Foster, is rising on the dry lake bed of Texcoco Lake east of the city. It was intended by the government of outgoing President Enrique Peña Nieto to replace Mexico City’s existing airport, which experts say is outdated and cramped.
It was to be Peña Nieto’s signature public work, a new hub for the Americas and a portal to Asia and Europe. But López Obrador has long questioned its expense and whether the contracts were awarded transparently.
Environmental groups have also raised concerns about the environmental impact of the new airport, set on a barren expanse that absorbs water runoff during the city’s intense rainy season. The outgoing administration said it would build holding ponds and drainage pipes to prevent flooding, but did not announce the details until May, almost four years after Peña Nieto announced the project.
The government-run group building the new airport said Monday that it would continue construction until the current administration’s tenure ends Nov. 30.
López Obrador had said he wanted to let the people decide whether to go forward with the airport project.
But the hastily organized vote was far from an official referendum. The dispersed polling places were staffed by volunteers from López Obrador’s party. Reporters noted that there were no checks to prevent people from voting multiple times.
When the results were announced late Sunday, Lopez Obrador’s spokesman, Jesús Ramírez, said the irregularities did not affect the final tally. Some 70 percent of voters chose the option to build two runways at the Santa Lucía air base instead of building a new airport.
Juan Francisco Torres Landa, managing partner in Mexico City for Hogan Lovells, a law firm that represents contractors among its clients, said the cancellation sent a message to investors that Mexicans are “unreliable.”
“Why would you spend the time and resources” to participate in complex bids “if at the end of the day that project will be canceled anyway?” he asked. Mexico’s standing “goes into flames.”
Jorge del Castillo, deputy Mexico manager for Mitsubishi UFJ, a Japan-based bank, said the use of the public vote to justify the cancellation raised the possibility that López Obrador would resort to similar votes to support other controversial decisions.
“The concern is if that’s the way he’s operating going forward, that is very dangerous,” Del Castillo said. The bank comanaged a credit facility for the new airport but has since been repaid.
Although López Obrador had been somewhat conciliatory with the financial community until recently, Del Castillo said his rhetoric was changing. Interpreting the president-elect’s comments Monday morning, del Castillo said the message was, “'Get used to it, because that is the way we will be doing things.'”
Technical experts say that Mexico City’s location, surrounded by mountains, constrains the available sites for a new airport and the aircrafts’ flight paths. They say the proposed alternative would support only a limited number of flights and would soon be surpassed by demand. In an Oct. 18 memo, Bernardo Lisker, the international director of Mitre, a consultancy that reviewed the site of the new Texcoco airport, warned that the coexistence of the current airport and a second one at Santa Lucía, where the runways would be added to an air base, had yet to be addressed by a “serious aeronautic study.” He added that “the risks are clear and present.”
He also explained that it would be a mistake to compare Mexico City with New York or London — cities with multiple airports. The memo, which is cited by the Mexican Institute for Competitiveness, was addressed to López Obrador’s chief of staff, Alfonso Romo, who has been his liaison with international investors as well as with the outgoing and the incoming transport ministers.
López Obrador said Monday that the French government had promised its support for a study that would show the viability of operating the two airports at the same time.
The president-elect added that his plan, which also involves upgrading an existing airport in the city of Toluca, some 40 miles away, would save Mexican billions of dollars by preserving the investment in the existing airport and adding new capacity.
But a study by the Mexican Institute for Competitiveness argued that canceling the new airport would cost the government some $6 billion dollars — with nothing to show for it. The Mexican peso fell Monday after López Obrador’s announcement, in its sharpest one-day drop since the election of President Donald Trump two years ago.
The decision to not build the new airport in Mexico’s capital would most benefit Houston, with its international airport, said Torres Landa.
“They will be the big winner,” he said. “That’s where you will make all the connections from Mexico to anywhere in the world.”