by Wolf Richter, Wolf Street:
A project of “mind-watering” magnitude in money and corruption.
The Mexican peso suffered its biggest rout in four months on Thursday, likely due to the realization dawning on market participants that the veteran populist Andres Manuel Lopez Obrador (or AMLO) may win the presidential elections on July 1. AMLO has led all the polls in Mexico for well over a year and is still 15 points ahead of his closest rival. And now he’s threatening to put an end to the country’s most expensive public infrastructure project, Mexico City’s new airport, which has been plagued by corruption, scandals, and cost overruns since its inception four years ago.
AMLO’s latest pledge has aroused fits of apoplexy among Mexico’s business elite, many of whom stand to rake in large sums of money from the project — no one more so than Mexico’s richest man, Carlos Slim, who told journalists in Mexico City this week that suspending the project “would mean suspending the country’s growth.’’ Slim urged AMLO to reconsider his opposition.
Slim’s concern is not wholly altruistic. Grupo Carso, one of his many construction companies, is deeply involved in the building project. Three big contracts allegedly worth 94 billion pesos ($5 billion) are in the hands of consortia led by Grupo Carso or other firms owned by Slim and his family.
The first tender that Slim’s family won was for the airport’s architectural design, which was awarded to a firm run by Fernando Romero, a Mexican architect who is married to one of Carlos Slim’s daughters. British architect Nigel Foster led the design project, for which Fernando Romero Enterprises was reportedly able to bill Mexico’s government a cool $1 billion.
Other large Mexican companies involved in the project include ICA, which almost went under two and a half years ago after overdosing on dollar-denominated debt, Prodemex, GIA, and Grupo Hermes, which is owned by Carlos Hank, a billionaire banker with cozy ties to the current government. Two other major participants are the Spanish infrastructure giants Acciona and FCC, the latter of which is also majority-owned by Carlos Slim.
One of the biggest potential money earners for some of these companies will be the airport’s absurdly high maintenance costs once it’s built. Until recently, the site on which it’s being developed was home to a very large lake, which was drained before work began. But the ground still has extremely high water content and low resistance to stress. As the Mexican newspaper Proceso reported last year, this will inevitably result in very juicy contracts just to keep the land upon which the airport is built fit for purpose.