Canceling Mexico City Airport Would Be Imprudent, Barclays Says

(Bloomberg) -- Analysts at Barclays Plc. defended the construction of a $13.3 billion airport in Mexico City that the country’s left-wing presidential front-runner has threatened to halt, saying that canceling it could usher in market volatility and negative reactions from investors.

“Overall, we view the NAICM as important for the region and for the country, as it would generate jobs and economic growth,” Barclays analyst Benjamin Theurer wrote in an April 23 research note outlining possible implications of the July 1 presidential election.

Andres Manuel Lopez Obrador, who is leading rivals in polls, has pledged to cancel construction if he wins, calling the airport a gift to contractors that’s steeped in corruption. The group behind the project, which was pitched as a solution to the overstuffed Mexico City airport, has already raised about $8 billion from foreign and local investors to fund its construction.

Barclays joins the likes of billionaire Carlos Slim and Moody’s Investors Service in pointing out possible negative repercussions of halting construction. Slim, Mexico’s richest man, told reporters last week that suspending the project is equivalent to suspending the country’s growth. Moody’s has said that halting it could negatively impact the creditworthiness of the country’s entire airport sector.

Canceling the project after almost 20 years of research, planning, investment and development would be “imprudent” and “likely cause volatility and negative investor and market reactions,” Theurer wrote. Lopez Obrador supporters who plan to vote for the populist candidate in search of change may not be aware of the implications of canceling it, he said.

Barclays says publicly-listed airport operators like Grupo Aeroportuario del Sureste, Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Centro Norte could initially react negatively if Lopez Obrador wins and follows through with his plans.

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