Now everything is up in the air, so to speak.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The results are finally in from one of the most controversial voting exercises ever held in Mexico. The people — albeit a tiny fraction of the whole electorate — have voted to scrap a new $13-billion airport for the capital that is almost one-third finished, at least $4 billion over budget, and mired in allegations of corruption and lack of transparency, dealing a hefty blow to some of Mexico’s richest business leaders, foreign construction companies, and the global lenders that have helped finance the project.
Roughly a million people, just over 1% of Mexico’s electorate, participated in the four-day voting exercise. They were asked whether the next government should finish the new airport, called NAIM, to replace Mexico City’s inadequate inner-city hub, or add two runways to convert a military air base in Santa Lucia (30 miles north of the capital) and keep the current airport. Almost 70% of voters chose the latter option.
The NAIM project has come under a barrage of criticism for a host of reasons beyond corruption and chronic lack of transparency, including concerns about the airport’s choice of location — a drained former lake bed — and what it might mean for the structure’s stability, especially in such a highly active earthquake zone, as well as for the region’s water supply, which according to Oxfam is at crisis levels already, due largely to the government’s predilection for mega-projects.
Dubbed a “public consultation,” the vote was non-binding and marred with serious irregularities. Despite that, Mexico’s leftist president-elect Andres Manuel Lopez Obrador (AMLO), who called for the referendum and is against the new airport, has vowed to respect the result, putting him on collision course with some very powerful business interests.
It also could do long-term damage to Mexico’s standing among global investors. The ratings agency Moody’s has cautioned that cancelling the project would have negative credit repercussions, not only for Mexico City’s current airport but the entire national sector. A few days ago, UBS added its voice of caution, warning that abandoning the project at this point would not only be hugely costly but could also put all future private investment at risk.
Fitch has already downgraded the outlook of Pemex’s debt from stable to negative over concerns about AMLO’s plans to sharply increase investment in the state-owned oil company. Now, AMLO risks alienating Mexico’s business elite and their political minders, many of whom have spent well over a decade fantasizing about the huge fortunes that could be made off the back of this massive, largely publicly funded infrastructure project, which is already almost one-third finished and at least $4 billion over budget.
No one is more invested in the project than Mexico’s richest man, Carlos Slim, whose son-in-law, Fernando Romero, together with British architectural superstar Norman Foster, designed the airport, at great cost. Slim-owned companies such as Grupo Carso are leading consortia on three big contracts, allegedly worth 94 billion pesos (around $5 billion).
Other large Mexican companies participating in the project include ICA, Prodemex, GIA, and Grupo Hermes, which is owned by Carlos Hank, a billionaire banker with ties both to Mexico’s outgoing president, Enrique Peña Nieto, who launched the NAIM project, and the Atlacomulco Group, a secretive, hyper-connected political network operating in Estado de Mexico, the State in which the new airport is being built. Peña Nieto served as governor of the State before becoming president.
There are also some major foreign companies involved in the project, including the English systems company Arup (which drew up the masterplan), the Boston Consulting Group (which designed the business plan), the Spanish infrastructure giants Acciona and Slim-owned FCC (which are helping build the terminals), and the Netherlands Airport Consultancy (which is in charge of the design of the runways, terminal building, taxiways, platforms and support buildings).
Given how much money is at stake in the project, not just in its construction but also in its future maintenance, the bill for which has purportedly already reached a staggering $29 billion, these companies, their investors and lenders will fight tooth and nail to ensure that AMLO does not upset the apple cart. As Mexico’s secretary for communications and transport said last year, almost all of the contracts for the construction and maintenance of the airport had been assigned by the end of 2017, making cancellation next to impossible, or at least eye-wateringly expensive.
But this is not only about the airport. Also at risk are long-hatched plans to build an “aerotropolis” — a vast multimodal “airport city”– around the NAIM airport, which investors hope will become the biggest transport/infrastructure hub in the whole of Latin America, occupying over 4,000 hectares of potentially extremely valuable land. According to the Mexican journalist Javier García Soto, it is this juicy prize that is most coveted by the Atlacomulco Group:
This is a huge project worth up to 20 times the total cost of the new airport whose development and funding will provide continuous multi-billion-dollar business for the next 50 to 100 years. It will involve the construction and development of shopping centers, hotels, motorways, industrial and business parks, free-trade zones, barrios of luxury accommodation, sports clubs and golf courses, even a theme park.
The new city will connect to the new port under construction in the oil-rich region of Veracruz, which has quintupled its capacity since Peña Nieto took office. “This is the Atlacomulco Group’s real business interest,” one of the group’s insiders told García Soto. “That’s why they want the new airport there and why they will defend it by hook or by crook, regardless of its technical or financial viability.”
No doubt, the Group’s members will be able to count on the assistance of the ratings agencies, which, as mentioned earlier, have already begun piling the pressure on AMLO’s spending plans. If AMLO honors his pledge to respect Sunday’s vote and cancels Latin America’s biggest infrastructure project, jeopardizing tens, if not hundreds, of billions of dollars of investment, he risks reaping a whirlwind of financial blow back. As UBS ominously notes, the honeymoon period between AMLO and the markets is well and truly over, and AMLO hasn’t even taken the reins of power yet. By Don Quijones.
AMLO’s team will have its work cut out. After decades of endemic corruption and mismanagement have bled Pemex of its financial resources, the Mexican state is trying to rebuild Mexico’s oil industry and develop a more nationalistic approach to energy policy. Read… Defiant Energy Policy of Mexico’s President-Elect Rattles Moody’s and Fitch
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Someone is about to thread on some pretty big toes. Interesting to see what’s going to happen …
I can ramble on with some of the best but I’m speechless.
Except to ask: are we talking civil war or uncivil war?
They are already in an uncivil war. Given the abundantly obvious fact that their culture is utterly debased and almost unbelievably violent, well, a generalized French revolution-like civil war is certainly not off the table.
Actually, you just perfectly described current situation in the USA.
“warning that abandoning the project at this point would not only be hugely costly but could also put all future private investment at risk”
translation: we want our pound of flesh and we’re going to get it or else. My guess is that if they finish the project the interest on the debts created will be more than what the damn thing was predicted to cost in the first place…………modern finance at it’s best.
I read somewhere that a new bridge was built in the bay area and the author was making the claim that by the time the whole thing is paid off, with interest charges, the damn thing costs double…..I wish I could find that article again.
AMLO is basically marking himself for assassination pissing off so many corrupt financial groups. I hope he succeeds, but I doubt it.
“marking himself for assassination pissing off so many corrupt financial groups”
I was thinking the exact same thing. How long before one of these so called “populist” leaders gets takin out for not playing along with the globalists game?
Who knows, may be something good will come of it. A revolution every now and then, it’s a good thing. And let’s face it, if Mexico became another Canada, that’s not a bad thing for everyone concerned. Sure, guys like Slim might get hosed, but let’s face it, most Mexicans likes old Carlos about as much as they like the drug lords and gangs that are corrupting the country.
Mexico is inches away from becoming a narco state. AMLO’s assassination could easily be the trigger for it creating an overt alliance between Mexico’s powerful businessmen and the drug lords, with all (surviving) politicians being the puppets.
They are not building an airport, they are building an attraction with an airport, or at least they were.
All of Mexico is corrupt.The police,the civil service the army
and later the president will be .You cannot clean it up as
corruption payments make up a large part of their GDP. I
propose a national tax to fund basic income for all as
people with money in their jeans are less corrupt as a rule.
“people with money in their jeans” … as opposed to people with money in their genes :-)
I have lived in Mexico City twice-the last in 1988. My sister married a Mexican lawyer from Gustavo Ordaz’s family. She is now back in the states after her divorce. She said it is the same as it always was. If you pay, everything’s fine no matter what you do. I have a feeling the “caravan” went through due to money in the hands of government officials. EVERYONE is on the take and I doubt there is anything that can be done about it. From what I have heard, it is the same throughout Latin America.
Maybe if they got paid a decent wage–instead of the government wasting money on giant boodoogles designed to make the rich richer–they wouldn’t be on the take, or at least the few that were would be easily outed and prosecuted.
So, what does that say about the “rating agencies”?
Same in Iran: if you have the money, you can pay your way – although a religious nutter in the militia might decide to go for you just for the fun of it, and out of envy.
“people with money in their jeans are less corrupt as a rule”
People with OPM in their jeans and nothing but time on their hands are the most corruptible people in the known universe.
This is one of the ways poor countries are kept poor, but there are plenty of other ways. It is also one of the ways richer countries are made poor, and those provide additional opportunities.
For example, one study from the Brookings Institution showed that federal taxpayers have subsidized the construction of 36 stadiums at a cost of over $3.2 billion since 2000. Others studies show many more billions subsidized at the state and municipal level. And you wonder why the roads and schools are falling apart. Billionaires need the money, and yours will do fine.
Make your own list of techniques but for heaven’s sake don’t give them any ideas or you’ll be putting ambitious MBAs out of a job. Make your own list of countries while you’re at it. Include your own country. Spreadsheets can be useful for this sort of thing.
regarding: “dealing a hefty blow to some of Mexico’s richest business leaders, foreign construction companies, and the global lenders that have helped finance the project.”
Perfect. Careful though, the ruling business cartel has a way of dealing with democratic leaders who think they can make decisions. They’ get him, somehow.
I remember years ago flying an extremely wealthy Mexican into a sheep hunting enclave in northern BC. He was about 30, and kept a young looking 13-15 year old boy-toy as an ‘assistant’. I remember asking the outfitter where these guys got all their money? “Who the hell are these people”, I asked?
His reply, “Remember the big Mexico City earthquake? This guy’s family got the contract to replace all the water and sewer lines. That’s where his money comes from”. And on and on and on it goes, and where it stops everyone knows.
Want to see what the US will look like someday? Just point your nose south.
I’m waiting to see if any of the poor auto assembly workers actually get the vaunted $16.00/hr from revising NAFTA. Oh, the money will be charged and imbedded into the product, but whether the workers ever receive a cent of it isn’t too likely.
“Want to see what the US will look like someday? Just point your nose south”
Doubtful. Our bankers are smarter than their bankers.
Thanks for your comment. My experience is the same. The only solution would be to take Mexico over and make it part of the US. Introduce our legal system and property ownership. It will happen at some time in the distant future…..although by that time the US might be just like Mexico….in terms of corruption unless we address campaign finance in this country which I doubt will happen in any of our lifetimes.
->The only solution would be to take Mexico over and make it part of the US.
As if the US is not as corrupt as Mexico and uses it as an export destination for its own corruption. Latin America was proclaimed to be the domain of American economic imperialism by the Monroe Doctrine two hundred years ago, and that has never changed. It’s why the US gets floods of economic and political refugees, very much of its own making.
That said, the present situation described in this article should come as no surprise to anybody. It’s yet another example of how modern ‘business ethics’ is conducted – the law of the jungle.
I dislike the term ‘neoliberalism’ because it impugns liberal traditions of social justice and economic cooperation, but that’s the term which has become established which describes the business ideology driving these situations. There is nothing ‘liberal’ in ‘neoliberalism’. It is the doctrine of radical self-interest, to the exclusion of any decency, and nothing is ‘wrong’ unless it can be successfully prosecuted, and then it is only legally wrong, because the jungle has no morals.
It is the philosophy of “The Individual in Society” by Ludwig von Mises, teacher of Friedrich Hayek, aka the ‘Austrian school’. Robert Simons of the Harvard Business School notes that economics is by far the dominant academic discipline in the United States today, and that many graduates take that acquired ideology of self-interest into the workplace of asset management, hedge funds, insurance, liquidity, and so on. Simons criticises what he calls “the unquestioning and universal acceptance by economists of self-interest – of shareholders, managers, and employees – as the conceptual foundation for business design and management.”
This philosophy rationalises, accepts, and promotes the profiteering of predatory transnational financial institutions. ‘Neoliberalism’ prescribes ‘market solutions’ to every problem, including business corruption, which is profoundly preposterous. Do you see any ‘market solutions’ to the world’s problems of economic corruption? Let’s be serious, shall we?
In 2008 the US, and thus global, economy was in meltdown. Greenspan testified to the House of Representatives: “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and equity firms.”
But self-interest means self-interest. The CEOs and top managers saw no need to honour their supposed obligations to their shareholders, let alone the general public. And they still don’t.
The weak are meat and the strong do eat. If you don’t have a seat at the table, you’re on the menu. Everybody should assume they’re going to be eaten by people who have the morals of a famished barracuda.
The only possible solutions are political, and Mexican politics, like virtually all western national politics, is heavily corrupted by neoliberalism. One can only wish AMLO all the luck in the world.
Anything post starting off with “As if the US is not as corrupt as Mexico…” isn’t worth my reading it, so I didn’t.
Thanks! American Exceptionalism is on page 4 of the list of confirmations. A quarter of the list comes from the articles here.
Excellent and perceptive! Well said!
The corruption, however endemic in the US, is subtler and in the highest levels (Congress and the revolving door of Lobbying), not otherwise.
I don’t have to slip a “20” to the guy at the DMV unlike most of Latin America.
It’s finally refreshing to find an EM politicians taking a “contrarian” view to those maxi-infrastructure projects which are so common throughout the world: NAIM, Putrajaya, the new Istanbul airport, the still-unnamed new Egyptian capital… not unlike white elephants in developed countries (see the high speed railways Western politicians love so much) they are sold on to a world easily dazzled by gadgetry and projected GDP growth figures but are really nothing more than colossal make-work projects at best and wealth-transfer schemes at worst.
Even if Lopez-Obrador is only leading this crusade to squeeze better deals from the Slim and Hank clans and their legions of contractors and vendors it’s a refreshing change over the past when mega-projects had to go ahead regardless of costs with politicians obediently bowing to pressure, often without even making a pretense of resistance. See the Petronas Towers, another EM white elephant with a sordid history which dazzles gullible Westerners.
Quite so, but these infrastructure projects are, in developed and ’emerging’ (from where into what?) are not merely vehicles for graft, and for pimping GDP, but the central totems of a civilization based on the shaky premise of infinite growth and Progress.
Soon to come tumbling down, as this irrational and untenable belief runs into the hard wall of resource constraints and and the revenge of a ravaged ecosphere.
The film-maker who made ‘Pan’s Labyrinth’ observed – with unpleasant and intimate experience of both countries – that Brazil was ‘so corrupt, it makes Mexico look like Switzerland’.
Recent analyses by the Zoological Society of London have revealed that humankind has destroyed 83% of all mammals and half of plants since the dawn of civilisation and that, even if the destruction were to end now, it would take 5-7 million years for the natural world to recover.
Brazil is expected to take that to 87% and 58% all by itself in the next few years, but that before recent elections.
New Mexican President has signed on to the President Trump team. President Trump intends USMCA to be a success. Can’t spell USMCA without USMC. eg Banks can tell it to the marines.
If you read Confessions of an Economic Hitman, what is happening in Mexico is following the blue print that is laid out in the book. It happens over and over to many countries. The people pay for it through higher taxes and utilities. Usually the countries end up defaulting o their loans and stay poor for a long time.
The blue print also lays out how to deal with uncooperative presidents! It provides real examles. It’s not pretty!
Mexico is a failing narco-corrupted state…like an addict, it needs to hit bottom before it can recover.
From my vantage, it makes no difference if we become Mexico in States or if Mexico becomes the States, there is harsh equivalence at work in this equation. Empires and Colonies are entering the final phase of this grand “experiment”. Funny thing is, I don’t sense that many sense the depth of the equivalence, like in a bad relationship, we focus on all the wrong parameters, never quite digesting truth or severity of where we’ve found ourselves.
The “30% complete” is pura fantasia. They may have doled out 30% of the money, but they aren’t anywhere near 30% with the construction.
Not to mention that it’s being built on land that is sinking 12-16″ a year.