Weekly Report - 25 May 2023 (WR-23-21)

MEXICO: Marines move in on Grupo México concession

Mexican Navy Marines seized the facilities and railway yards on a section of line in the eastern state of Veracruz, operated by Grupo México, one of the country’s largest conglomerates, early on 19 May. A day earlier President Andrés Manuel López Obrador had issued a controversial decree declaring the section of track to be of “public utility” as part of an ongoing tussle with the supreme court (SCJN).

The domestic context is that with a year and a half to go before the end of his six-year presidential term, President López Obrador has been pushing hard to complete a series of multi-billion dollar pet infrastructure projects, including the Tehuantepec Isthmus Corridor, a major rail freight line linking the Atlantic and Pacific Oceans, the Mayan tourism train, the Dos Bocas oil refinery, and the Mexico City airport. The principal motivation for López Obrador appears to be to grant wider powers and jurisdiction to a Navy-controlled company constructing the Tehuantepec Isthmus Corridor.

López Obrador received a setback on 18 May when the SCJN struck down a presidential decree from November 2021 declaring all infrastructure projects to be matters of national security and public interest. The SCJN said the decree violated transparency laws about public works. Unfazed, López Obrador then issued a new national security/public interest decree limited specifically to the Tren Maya, the Tehuantepec corridor, and some airports in the south of the country.

The following day the marines expropriated the 120km Coatzacoalcos-Medias Aguas section of the wider 11,137km Ferrosur concession held by Grupo México. The seizure was described as “temporary”. But in a statement on 21 May the company, led by Germán Larrea, described the seizure of its facilities as “surprising” and “unusual”, claiming that it had been negotiating with the government in good faith and that this had now been jeopardised.

The private sector reacted negatively to López Obrador’s decision. The umbrella business association Consejo Coordinador Empresarial (CCE) questioned the legality of the measure and said it would undermine business confidence and job creation.

The government has indicated that it is prepared to pay compensation for taking control of the railway; Grupo México, whose shares dropped 7% on news of the expropriation, is reported to have estimated an initial figure of US$528m, which the government in turn rejected. López Obrador is a longstanding critic of Larrea, accusing the businessman of disregarding environmental protections and the safety of his workers in various mines, including a 2006 explosion in a coal mine in Coahuila state which left 65 dead. The company is also involved in controversy over the construction of an unauthorised tailings dam in Sonora state.  

On 22 May the SCJN struck down the government’s enabling decree, which had declared the project a matter of public interest and national security. López Obrador responded angrily, accusing the SCJN of being “at the service of a minority” and uninterested in the fate of the majority of Mexican people. In a serious escalation of his ongoing clash with the SCJN, he alleged that magistrates on the top court had links to an unspecified “group” determined to thwart the plans of his Fourth Transformation.


The Ferrosur expropriation could impact other areas affecting Grupo México. President López Obrador said on 23 May that the government would consider buying a controlling stake in Banamex after rumours circulated that Grupo México, which was in advanced talks to purchase the retail bank for some US$7bn, might pull out of the transaction because of a lack of protection from expropriation. Speaking during his morning press conference, López Obrador said that purchasing a controlling stake for the government would be good for the Mexican people because banking is “a perfect business”. However it is likely that López Obrador’s interest in Banamex is part of a negotiating strategy, designed to leverage a compensation agreement over the Ferrosur rail concession.

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