Familiar Avalos: A Tale of Two Infrastructure Projects
With his December 1 inauguration come and gone, Mexican president Andrés Manuel López Obrador’s quest to transform the country has officially begun. His rhetoric can finally become policy, and he has already started to effect change.
Even before taking office, his transition team laid the groundwork for two major infrastructure projects: the expansion of the Santa Lucía military base as an alternative to the new international airport being built in Texcoco; and the so-called Tren Maya railway passing through several major archaeological sites in Mexico’s southeast. Both proposals have been controversial since López Obrador announced them on the campaign trail, and dissension has not disappeared since he and his team moved to make them a reality. Vindicated by poorly-run referenda, both of these decisions hurt López Obrador’s relationship with the private sector and bode poorly for his administration’s fiscal policy.
López Obrador’s proposal to expand the Santa Lucía military base and renovate Mexico City’s existing airport came out of his opposition to the new airport already under construction in Texcoco. Both Santa Lucía and Texcoco are on the outskirts of Mexico City, but the former is 45 kilometers away from Benito Juarez International Airport in Mexico City, while the distance to the latter is only 14 kilometers. Enrique Peña Nieto, López Obrador’s predecessor, sponsored the Texcoco project, which has been under construction since 2015 and was set to open in 2021.he federal government has already spent around five billion dollars on it. The new airport has faced environmental concerns and increasing costs, and López Obrador has used this, along with allegations of corruption, as grounds for seeking an alternative.
Meanwhile, López Obrador suggested the construction of the Tren Maya as a way to promote economic development of one of Mexico’s poorest regions. As proposed, the Tren Maya will traverse 1,500 kilometers across five states, including stops at major tourist destinations like Cancún, Tulum, Palenque, and Chichen Itzá.
On the campaign trail, López Obrador promised to seek the public’s approval before moving forward with either of these projects. To this end, his transition team organized two popular votes—one between October 25 and 28 asking voters to choose between the Texcoco and Santa Lucía airports and one between November 24 and 25 gauging support for the Tren Maya. Both votes were marred by irregularities, with reports of people voting more than once, and by pitifully low turnout, with only around a million votes cast both times around (around 1% of eligible voters). Worse yet, the referenda seem to have been used as a substitute for thoughtful analysis, as the examination of important factors like cost, return on investment, and environmental impact that was conducted for the Texcoco airport has been repeated for neither the Santa Lucía project nor the Tren Maya.
The Tren Maya has received particularly strong pushback. López Obrador received two separate letters asking him to postpone the vote. One, written by around 100 scientists and environmentalist groups, demanded a thorough environmental evaluation, expressing concern for the jungles and nature reserves that the railway will cross if constructed as planned. Some scientists have even suggested that the project could push around 50 endangered species to the brink of extinction in Mexico, including the jaguar. The other was authored by 43 indigenous communities from the state of Yucatán, stating that permission to use their land for the project had not yet been asked and that they would reject the result of any consultation that excluded their perspective. According to the United Nations, Mexico’s international agreements expressly require that the government consult and inform indigenous communities before moving forward with intrusive projects like the Tren Maya.
The result of the referenda has already damaged López Obrador’s relationship with the private sector. The day after the airport vote, the peso fell by 3.6 percent, its worst single day loss since the election of Donald Trump in 2016, and hit its lowest level with respect to the dollar in four months. Despite López Obrador’s promise that he will honor and protect the investments made and contracts agreed when the airport was set to be built in Texcoco, he has faced a harsh backlash. In the aftermath of the vote, Carlos Slim, Mexico’s richest person and an investor in the Texcoco airport, declared that “suspending the [Texcoco] project is like suspending the country’s growth.”
Prominent businessmen have also expressed doubts about the Tren Maya’s financial viability. According to several experts, only the sections passing through the states of Quintana Roo and Yucatán, which make up less than half of the proposed trajectory, will be profitable. Such gloomy predictions about the Tren Maya’s potential returns on investment cast an ominous shadow on López Obrador’s plans to finance the project through a public-private partnership.
Lastly, both fiscal decisions seem especially irresponsible when considered together. The Peña Nieto administration estimated that it would cost nearly 6 billion dollars to cancel the Texcoco airport. López Obrador and his advisors have suggested that the Santa Lucía airport will cost another 3.6 billion dollars, and that the Tren Maya will cost between 6 and 8 billion dollars. Given that the Texcoco airport is almost a third of the way done and approximately 13 billion dollars away from completion, López Obrador may very well end up spending more money and delivering two projects of inferior value. Mexico’s new president seems genuinely convinced that these projects will benefit the country, but the fact of the matter is that they are subject to financial realities that will constrain and define their consequences.
López Obrador has promised to neither raise taxes nor increase the national debt, but financing the new projects will be difficult under those conditions, especially considering the private sector’s growing reluctance to support the president’s proposals. Adding to this concern, the same referendum that approved the Tren Maya also endorsed the construction of an oil refinery, another railway connecting the Atlantic and Pacific coasts, and significant expansions in government pensions for seniors and scholarships for public school students. The so-called “fourth great transformation” of Mexican civil society, López Obrador’s central campaign promise, is shaping up to be an expensive one, and it is unclear if he will be able to foot the bill.