Mexican President Andrés Manuel López Obrador’s recent decision to expropriate private property may have a serious impact on the country’s business environment. The government seized part of a rail line owned by Groupe México SAB, a private concession, considered a “public utility,” in order to support a transportation hub on the Isthmus of Tehuantepec. This move has undermined Mexico’s business climate and the confidence of investors in the government. AMLO had previously maintained a detente with Mexico’s business elite but this expropriation has ended that.
AMLO’s focus on finishing several landmark infrastructure projects before his term ends seems to be the driving force behind this decision. However, it is purely political given that these projects face cost overruns and delays and are of questionable practicality. As the general election approaches, AMLO has escalated disputes with political opponents, including technocrats, judges, and journalists. The acquisition of private property can be seen as a message to Mexico’s second-richest man, Mr. Larrea, and a way to show AMLO’s supporters that they are still fighting corporate interests.
However, this decision has undermined Mexico’s historic opportunity to attract foreign investment and has raised concerns among businessmen who are deeply worried about the negative impact. The AMLO administration has tried to justify this move by emphasizing the project’s strategic importance and national security. But the economic prudence of AMLO’s decision is questionable, and the way forward seems to be a lengthy legal battle.