Incoming President López Obrador announces cancellation of NAICM on October 29

Incoming President Andrés Manuel López Obrador (AMLO) announced on October 29 the cancellation of Mexico City’s New International Airport (NAICM). The decision was adopted after a majority of participants taking part in an informal public consultation, organized by AMLO’s political party between October 25-28, voted to cancel NAICM and expand existing airport infrastructure in the Santa Lucía military base (NLU). According to reports, the NAICM project is 32% completed, and the funds for its completion have been already allocated. Following the announcement, Mexico’s peso (MEX) and 10-year USD sovereign bonds fell to four-month lows. The country’s stocks also declined, hitting their lowest point since February 2016.

Although AMLO has taken a more market-oriented approach since his electoral victory in July, he remained adamant about cancelling NAICM, perceived by many of his supporters as an irresponsible investment due to a number of financial and environmental reasons. However, coupled with pressure from the business sector, considering the legitimacy and transparency of the informal poll is highly controversial, we continue to assess that AMLO could potentially call for a formal poll to revalidate the results after he is invested president in December. In this sense, we assess that AMLO could still decide to continue NAICM, shortening, however, the budget or the scale of the project. In any event, uncertainty over the project could prompt workers assigned to NAICM’s construction site in Texoco to stage demonstrations over fears of losing their livelihoods.