In Mexico, occupation of railway lines fuels investor fears

The differences between the government and the Mexico Groupone of the largest conglomerates in the country, as a result of the occupation by navy units of three railway sections that it had in a subsidiary of the corporation, fueled fears among investors on Monday and caused the fall for the second consecutive day Mexican stock exchange.

The Stock Market Prices and Quotations Index ended the session with a loss of 1.53% affected by the fall suffered by most of the shares, including Grupo México — the third most important company in the stock market — which registered a decline of 3.16%.

The action of the Mexican conglomerate suffered a drop of 4.29% last Friday after the temporary occupation of three railway lines that the company Ferrosur had in the state of Veracruz was announced, a measure that hit the Mexican Stock Market that closed on Friday with a loss of 1.75% and already accumulates a fall of 3.25% in two days.

Similarly, the Mexican peso suffered a depreciation of 0.63% that brought the currency’s price to around 17.90 pesos per dollar.

Analysts attributed the negative behavior of the stock market and the slight depreciation of the peso to the uncertainty that has surrounded the temporary occupation of the railway sections due to the fact that to date the government and the Mexico Group They have not been able to reach an agreement on how the seizure of lines Z, ZA and FA that run between the southern towns of Medias Aguas to Coatzacoalcos, from Hibueras to Minatitlán and from El Chapo to Coatzacoalcos, which Ferrosur had had under concession since 1998.

Mexican President Andrés Manuel López Obrador made it clear on Monday that the differences between his government and the group led by businessman Germán Larrea — who is considered the second richest man in Mexico — have not been able to be overcome, but he was willing to seek a agreement.

Since May 19 elements of the Secretary of the Navy occupied the three railway sections after the publication of a decree that declared “public utility” the facilities that passed to the state company Ferrocarril del Istmo de Tehuantepec to join the project of the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) that seeks to connect the Gulf of Mexico with the Pacific.

During his morning conference, López Obrador affirmed that the occupation was carried out in accordance with the constitution and the laws, and ruled out that the measure could be assumed as an expropriation.

“This concession or this stretch of concession, yes, it has to be restored, it is the only thing, and we, looking for an agreement, give them the right of way, but the road, which belongs to the nation, will return to the domain of the nation for national security and public interest”, affirmed the ruler when rejecting the questions made by businessmen and analysts against the measure.

López Obrador denied that the decision responds to a confrontation with Larrea, who is one of the investors who is competing to acquire Banamex, the Mexican subsidiary of the US corporation Citigroup, and said that the talks with Grupo México were interrupted after the company demanded compensation of 9,500 million pesos (about 527 million dollars).

“Well, that’s no longer possible… not even at a fair price, but an abuse”, he added.

Although the decree states that the measure will be applied temporarily, it does not specify how long it will be extended, and it is expected that the CIIT will make the compensation.

The occupation was carried out one day after López Obrador declared “National security” the multi-million dollar railway project known as Tren Maya, the Interoceanic Corridor of the Isthmus of Tehuantepec, and four airports in the south of the country, in open defiance of the Supreme Court of Justice of the Nation, which determined that the agreement that decreed that the trains were unconstitutional tourism and other infrastructure projects were works of “National security”.

Grupo México Transportes said in a statement on Sunday that it was still in talks with the authorities and analyzing the scope and effects of the occupation decree to determine the actions they will take, but admitted that if a negotiation is not reached “temporary occupation will become definitive, deteriorating the company, its employees, customers and the free market”.

The director of economic analysis of the local financial group Banco Base, Gabriela Siller, told The Associated Press that the occupation of the three railway lines “increases the risk for invest in mexico and it makes the country less attractive at a time when we should be taking advantage”.

Siller indicated that as long as an agreement is not reached and the payment of compensation is not defined, uncertainty among investors will persist and in the end the Mexican economy will be affected.

According to official figures, during the first quarter of this year, foreign direct investments reached 18,636 million dollars, which represented a drop of 4.1% compared to the same period in 2022.

Source: AP